The Chinese government is sticking to last year’s target of economic growth rate of “around 5%” this year, and announced a plan to reduce the budget deficit to 3% of economic output
The opening of China’s week-long annual parliament left most Asian markets on Tuesday, led by a sharp decline in Hong Kong, as investors were disappointed by the lack of a major stimulus package to shore up the sluggish economy.
Stock markets in the region were already trending lower after falling from record highs on Wall Street on Monday as the US Federal Reserve showed signs it was in no hurry to cut interest rates. US stock futures also indicated a decline, as did European stock futures.
Bitcoin hit two-year high as it continues to rise to $68,828, putting it within reach of an all-time high. Gold hit a closing high of $2,114.99 on Monday and continued to hover around that level.
The Chinese government is sticking to last year’s target of economic growth rate of “around 5%” this year, and announced a plan to reduce the budget deficit to 3% of economic output (last year’s revised value was 3.8%).
The government also announced plans to issue special ultra-long term government bonds worth 1 trillion yuan ($139 billion), which are not included in the budget.
Mainland stocks recouped early losses, with the blue-chip CSI300 index up about 0.45% by 0600 GMT, amid signs of suspected government-backed purchases of some exchange-traded funds (ETFs).
However, it failed to boost other markets in the region, and Hong Kong’s Hang Seng market further worsened its previous decline, reaching 2.67%. MSCI’s broadest index of Asia-Pacific stocks outside Japan fell 1%.
The early announcements from China’s NPC suggest “large fiscal stimulus is off the table for now,” according to James Kniveton, senior corporate FX dealer at Convera.
Stability is still the overriding factor in Chinese policy making, and the announcements so far seem to conform to that philosophy, he added.
Japan’s Nikkei average pared its early losses in afternoon trading, but ended the day slightly in the red, falling short of a new record closing price.
