China's Economic Outlook in 2024: Debt, Deflation, and Regrets

Chinese leaders have agreed to run a budget deficit of 3% of GDP in 2024, lower than this year's target, indicating a desire to maintain fiscal discipline. However, they have the option to issue off-budget sovereign debt, including special sovereign bonds, to provide additional fiscal support as needed. The issuance of special debt could amount to 1 trillion yuan ($140.16 billion). China sees special bonds as an extraordinary measure for specific projects or policy goals. The government is also considering increasing the bond quota for local governments in 2024. The annual Central Economic Work Conference, where the course for China's economy is charted, took place behind closed doors this week. China's fiscal policy for 2024 is expected to be flexible, moderate, precise, and effective. The government advisers recommend a growth target of around 5% for 2024.