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Aim Low And Avoid Disappointment

Posted March 7, 2023 at 11:45 am

What’s going on?

The Chinese government announced a pretty unambitious growth target over the weekend.

What does this mean?

2022 won’t be going down in the history books as a great year for China: with lingering lockdowns weighing on businesses and consumers alike, the world’s second-biggest economy only managed to clock up 3% growth – a serious fizzle after pre-pandemic years. Naturally, folks had high hopes for the country’s reopening, especially after sentiment in the manufacturing sector hit its highest level in more than ten years last month. And the nation’s increasingly clogged roads might well have motorists sighing, but they’ve got economists all goggle-eyed about how busy businesses must be. That meant observers were extra disappointed by the government’s 5% growth target – its lowest in more than thirty years.

Why should I care?

Zooming in: Not the end of the world.

That target could be a wily move: China fell miles short of last year’s growth target, so the country might only be aiming low in order to meet (or beat) expectations this time. And the government announced some encouraging initiatives as well, like making domestic demand – that’s consumer spending and business investment – this year’s top priority. Talk of expanding market access for foreign investors, upping employment, and managing risk in the property sector is promising too – so don’t let the headline figure get you down.

The bigger picture: Compromised commodities.

China also revealed a new, smaller quota for special government bonds – a move that could trigger cutbacks by the local authorities counting on them to fund infrastructure. Combined with lower growth, that could spell trouble for the global commodities that China imports by the boatload. No surprise, then, that the prices of steel and oil both dropped on Monday.

Originally Posted March 6, 2023 – Aim Low And Avoid Disappointment

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