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We'll take a closer look at further comments from JR. Own Pale, and we'll also talk a little bit about US China relations and also the big story of this week here in this part of the world was China's NPC meetings. And joining us now for some discussion is Leo pai Chen, who is Asia economist at Fidelity International. So on balance here, how do you read the output that we've got from policymakers, because there's an awful lot to consider.
Thank you for having me today. Yes, a session has been the main focus of our part of the world. The growth target has been exactly in line with market expectations at around five percent, but I think most participants agree that this is a very challenging goal to achieve. There has been signals that PLC makers are keen to foster a stronger sequential growth momentum, particularly given that the low based effect from the pandemic would like to fade
from this year. So there are moderately stronger aims to support such targets, such as fiscal policy expansion, as well as some of those initiatives and campaigns around consumption upgrading as well as manufacturing sector upgrading.
I hear what you're saying about consumption upgrade. I'm sorry, but a lot of it seems supply side driven rather than consumption. Does that concern you at all?
Yes? I think probably mostly referring to the priority to expand manufacturing sector investments, and that could tell lead to more supplies coming through China given that there has been some incremental policy supporting consumption. So I think on balance we're probably looking at China with a relatively stable domestic demand recovery, but much more so from the supply side, so load inflation is our ba.
Case, miss Leo. There seems to be a gap between the way we perceive growth in China at the moment and the way policymakers do. I mean, the headlines are all that you know, you've got a property crisis, you've got slumping sales, but then we have days like yesterday where we saw trade pretty strong, exports actually blew away estimates. And when you look at the policymakers themselves, they seem to be kind of comfortable with where China is, albeit
with a number of measures of fine tuning. You know, how should we really read this.
Well? I think that boils down to a balancing act from the policymakers between supporting a cyclical upturn compared to their priorities of a structural transition in the long run. So in my perspective, I think the policymakers are trying to balance between both. From a cyclical perspective, as you
mentioned about, incremental is in policies that stabilizes growth. So in our case scenario within controlled sulation is probably the best way to describe what is happening in China right now, whereby from a cyclical perspective, growth momentum is likely to stabilize with incremental growth, but the focus really is on the long term structural shift away from property as a driver of growth to seeking of new drivers of growth along the way.
I'm wondering if we can talk about geopolitics US China right now. We just did a story a short while ago about the US Congress attempting to force the Chinese parent of TikTok to essentially sell the platform because of US national security concerns. Is the tension right now enough between these two superpowers to significantly restrain China's growth? Is that one of the main obstacles here?
Well, I think just commenting that from a Chinese growth outlook perspective, unfavorable our geopolitical environment is definitely going to hamper China's growth in some areas like high tech breakthroughs, as well as to some extent trade developments. But that being said, China has its own set of challeges domestically as well. Most notably, we're facing structural headwinds from the property sectors slow down and LGFV sector is also facing
rising that risks. So I think from a structural perspective, the policy settings are somewhat of accommodative policy stunts, that is, with a focused to resolve the domestic sector risks.
At this moment, we're seeing local governments selling a lot more assets here to try to show up their position, their revenue and their overall balance sheets is that something that you know is a good sign or a bad sign.
Well, I think we probably need to take this in consideration from a broader context on the fiscal shift from China. Yes, local government are facing more risks, but local governments are actively resolving these risks by various means. The asset sales in absence of lend sales revenue is perhaps one of the resolutions. But if we zoom out to a broader context, we have seen initiating the issuance of ultra long sovereign
bounds from the central government. That's expansion by one trillion this year, and they were likely to be more done. I think this is a fiscal pivot in China's context, where the central government will be taking more responsibility in terms of fiscal spending, while allowing the local government to focus much more on resolving the debt by alleviating some of the burdens from the local government.
Miss Leo, I'm wondering if we can pivot to Japan next, because we are seeing a much much stronger currency right now where the dollar is concerned. We're trading roughly one forty seven ninety Earlier in the week, we were we learned that Japanese wage growth accelerated in the month of January, the fastest clip since June. And right now the swaps market is betting that we're going to get a change
in monetary policy at this month's meeting. Do you think it's too soon for the bo J to change course.
Yeah. For Japan, the developments recently has been very interesting. We have all been saying that Japan is gradually preparing the market for an exit executive interest policy before the office lived off, which is one of their main considerations to declare that deflation is officially over in Japan. So we have seen some positive news from both the shunto wage negotiations, Spring labor wage negotiation results as well as earnings that's being much higher than expected. So all these
are supportive of BOGS to kickstart is normalizing process. Wile based case is still of a pro lifting of negative interest rate, but it does look more gradually likely that they could perhaps start moving March as a risk case.
All right, I think we'll leave it there, Miss Lee. Thanks very much. Leu Paigen joining us here Asia Economists Fidelity International.
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