It is time for us to again look East as China has made some economic announcements. At the NPC and CPPCC conference it has announced this.
BEIJING, March 5 (Xinhua) — China targets an economic growth of 4.5 percent to 5 percent this year and will strive for better in practice, according to a government work report submitted Thursday to the country’s top legislature for deliberation.
The “strive for better in practice” is interesting framing but the main message is as Bloomberg points out below.
China set its annual economic growth goal at a range of 4.5% to 5%, the least ambitious expansion target since 1991.
The objective for 2026 was in a copy of the government’s annual work report seen by Bloomberg News. While in line with expectations, it is the first downgrade since authorities cut it to about 5% in 2023. No target was set in 2020 because of the pandemic.
So it is not only us western capitalist imperialists who have problems with economic growth although such numbers are an order of magnitude higher than my home country the UK can manage. Xinhua continues the central planning objectives below.
Main targets for development this year also include: a surveyed urban unemployment rate of around 5.5 percent; over 12 million new urban jobs; an increase in consumer price index of around 2 percent; growth in personal income in step with economic growth; a basic equilibrium in the balance of payments; grain output of around 700 million tonnes; and a drop of around 3.8 percent in carbon dioxide emissions per unit of gross domestic product.
The unemployment rate target is interesting because it was 5.2% in January so they seem to be warming people up for a rise. Then we get a distortion of language that would challenge even a central banker by claiming equilibrium in the balance of payments! Back in the real world it is a major imbalance and as we have looked at several times is getting worse.
BEIJING, Jan 14 (Reuters) – China on Wednesday reported a record trade surplus of nearly $1.2 trillion in 2025, led by booming exports to non-U.S. markets as producers looked to build global scale to fend off sustained pressure from the Trump administration.A push by policymakers for Chinese firms to diversify beyond the world’s top consumer market by shifting focus to Southeast Asia, Africa and Latin America paid dividends, cushioning the economy against U.S. tariffs and intensifying trade, technology and geopolitical frictions since President Donald Trump returned to the White House last year.
I can only assume that this is intended for a domestic audience who they hope will not be fully aware of this. It will require some spinning when they report export triumphs though.
Also we see that they aim to raise the rate of consumer inflation. Only yesterday we were reminded that there has been much less than this for some time.
In late February 2026, according to the monitoring of market prices of 50 kinds of important means of production under 9 categories in the national circulation field, the prices of 23 products increased, 21 kinds decreased, and 6 kinds remained flat compared with those in early February 2026.
Care is needed as the times they are a changing because I note in the detail that LNG was some 12% lower as we know that LNG prices have surged this week. Also even cheap Russian oil will not be as cheap as it was. and this morning has brought another sign of things being strained.
China Tells Top Refiners to Suspend Diesel and Gasoline Exports China’s government has instructed the country’s largest oil refiners to suspend diesel and gasoline exports amid a Persian Gulf conflict disrupting crude supplies. ( CN Wire)
Also there is this.
Oil Supertanker Hire Cost on US-Asia Route Hits Record at $29M The cost of hauling 2m bbl of crude oil on the US-China route jumped to $29.09m, according to Baltic Exchange data. That’s the equivalent of about $14.50/bbl, or almost 20% of the WTI futures price. ( @chigrl)
So for now an inflation rise is taken care of although of course wars are very volatile in their impacts.
The banks
There is another consequence of Chinese policy and we see it in the banking sector.
Chinese banks, flush with low-cost funds, are reshaping parts of the global loan market, underscoring how deflationary pressures in the world’s second-largest economy are increasingly influencing competition with international lenders. ( Bloomberg)
This has some similarities with the Carry Trade but also some differences. Both start with people looking for cheap funds and I looked at this on September 4th last year.
We noted the all-time lows being seen as its benchmark 10 year yield went below 2% as autumn turned to winter last year. Well now it is 1.75% as those invested in Chinese government bonds have a party as opposed to the bond vigilantes in the West.
This morning the Chinese ten-year is 1.79% so the basic situation is the same and it has avoided the bond yield rises we have seen in the West this week. These days it is quite a bit cheaper than even Japan. So Chinese banks have an advantage.
Much like US and European manufacturers who have long complained about being undercut by cheaper Chinese rivals, bankers at global institutions now say they’re facing the financial equivalent: being priced out of some of Asia’s most sought-after borrowers as Chinese lenders extend cheaper credit across borders. ( Bloomberg)
In a way the above is amusing in that you can almost hear Bloomberg thinking “The Precious! The Precious!” about western banks. An example is quoted of them being undercut.
The month before that, global banks such as ANZ Group Holdings Ltd. and Standard Chartered Plc wound up not joining a three-year refinancing for Hong Kong-listed delivery firm J&T Global Express Ltd. Eight banks, five of them Chinese, lent 10 billion yuan ($1.5 billion) at 2.6% — far below the dollar benchmark of around 4%.
This gives us yet another touch of The Vapors.
I’m turning JapaneseI think I’m turning JapaneseI really think soTurning JapaneseI think I’m turning JapaneseI really think so.
This is what they did back in the day when they had a large trade surplus as one of the ways the balance of payments balance is via capital flows. It is a bit of a swerve but they may have meant this with “equilibrium” earlier although it can be used to justify any balance of payments position! It also takes me back in time to when I worked in Tokyo and Japan was where China is now.
Comment
What we are seeing are further consequences of the Chinese housing bust. GDP growth was supposed to partly come from higher consumption driven by wealth effects from higher house prices. So it has weakened and we have seen the shift to even more exports of manufactured goods. With China’s rate of saving there is plenty of money to lend abroad at what are relatively cheap interest-rates.
What is next? Well it seems more of the same.
Analysts warn further declines are likely: John Lam, UBS Group AG’s head of China property research, said used home prices in major cities have fallen over a third from their peaks and may continue dropping for at least two more years. ( CN Wire)