CRU's Bold Calls on China Stimulus Were Right
LONDON, May 26, 2020 /PRNewswire/ -- The 22nd May marked the first day of China's 2020 National People's Congress. The overall message from this meeting was to achieve macroeconomic stability following COVID-19.
Premier Li Keqiang announced a stimulus package worth 6% of GDP or RMB6 tn ($840 bn). No GDP growth target was announced for 2020. Markets were disappointed. In contrast, the package is bang in line with our expectations. We see it as net positive news for the economy and commodities markets in 2020.
A target for unemployment but not for GDP growth
- What we expected: No growth target. Employment of primary concern.
- Announced: No growth target. Aim to create more than 9 million urban jobs, and target for the urban registered unemployment rate at 5.5%.
As expected, China's government decided not to set a target for GDP growth in 2020. They justified this with respect to the high uncertainty in the aftermath of the COVID-19 crisis. They confirmed their focus on maintaining employment, people's livelihood, and intentions to eliminate poverty among all rural residents.
Fiscal stimulus of 6% of GDP
- What we expected: Fiscal stimulus of 5-8%.
- Announced: Fiscal stimulus of 6%.
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