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China: No drama yet from the NPC - ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 7, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    Tim Condon, Chief Economist at ING, suggests that based on their view that it’s a CFETS basket peg and on ING’s USD/Majors forecast, their yearend USDCNY forecast is 6.65.

    Key Quotes

    “We do not think there have been many surprises yet from the National People’s Congress, which started on Saturday. The setting of a range for the annual growth target – 6.5-7.0% – was signalled in early February by NDRC head Xu Shaoshi. The absence of a target for trade growth, which we assume was because of uncertainty about the causes of last year’s big miss (-8% actual vs. a target of 6%), was a mild surprise.

    On macro policy, the 3.0% of GDP fiscal deficit target was widely expected. The target was 2.3% in 2015 but the realized deficit was a record 3.5%, which we think means this year’s realized deficit will be closer to 4% of GDP. We haven’t seen a figure for the size of this year’s local government bond swap but the press has reported it would be CNY4tr (CNY3.2tr in 2015). On monetary policy the new description is “prudent with flexibility” and the target for aggregate financing growth is 13.0%, up from 12.3% in 2015 and the same as the M2 growth target (13.3% in 2015).

    For the 13th Five-Year Plan (2016-2020), PM Li told the NPC delegates that “replacing old drivers of growth with new ones…is a painful adjustment. But it is…an upgrading process with great promise.” The plan will build on the “five development concepts” of innovation, coordination, green development, openness and inclusiveness, targeting an increase in research and development spending to 2.5% of GDP from 2%. The urbanization target remains unchanged at 60% by 2020 (currently 56%). 100 million people will be granted urban residence permits. For context, there are 270 million migrant workers living in cities without a valid urban residence permit.”
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