(Bloomberg) -- China’s economic growth target of 5% suggests Beijing will introduce more measures to support the economy, with money managers and analysts expecting rate cuts and policies to encourage consumption.

The plan to issue one trillion yuan ($139 billion) of ultra-long special central government bonds is seen as meeting market expectations, analysts said. Yields for longer-dated debt will probably fall further, some said.

Here are comments by money managers and analysts:

GDP Growth Target

Paul Pong, managing director at Pegasus Fund Managers:

• “For China to achieve 5%, when the property sector is becoming a smaller driver of the economy, means forceful measures will concentrate on boosting consumption this year. Infrastructure spending may also see an increase this year
• “Electric vehicles, sportswear and healthcare sectors are among the areas that might benefit most
• “For property, I think the growth target this year means Beijing will try its best to avoid unfinished homes in China - they’ll do whatever they could to help developers’ financing to deliver homes
• “This means China market may have seen a bottom around these levels given the really cheap valuation. To be sure, investors’ confidence in China remains really weak and people are still worried about the property problems
• “Things to watch include future RRR cuts, concrete incentives to encourage consumption and policies to properly handle debt issues at property sector.”

Xin-Yao Ng, investment director at abrdn:

• Traders are likely to show some disappointment with China’s targets for GDP growth and budget deficit this year. Sees GDP growth target at around 5% within expectations, and budget deficit of 3% below last year’s level. One trillion yuan special new sovereign debt isn’t seen as extraordinary
• “It probably disappoints more based on announcements thus far, and investors still will like more forceful fiscal measures to boost the economy. Government spending at least based on this doesn’t seem to provide an added boost to the economy”
• Property and consumer sectors are still weak, and will be useful to have some more forceful measures behind those too

Zeng Jiqing, fund manager at Beijing Nuohua Investment Management Co.:

• A target of 5% seems like a strong figure following 2023. Many are expecting lower rates of growth and have also toned down expectations for personal income
• “It means that there will be plenty of opportunities in the market this year, and if we can maintain this pace, that’s better than many other nations can say”
• The policy direction has been clear and consistent in the past months, and the biggest opportunities remain in the transition to new production factors and in a new rounds of pushing for equipment and software upgrades

Fanwei Zeng, investment analyst at GAM Investment:

• “As 2023 GDP growth was 5.2% on a low base, policymakers striving for stronger economic growth indicates additional and more robust stimulus policies
• “As for budget deficit, the overall direction of fiscal policy is toward a more relaxed stance, and it may expand along with the expansion of the economic fundamentals
• “Along with high household savings, a low interest rate environment, attractive valuations of Chinese stocks and continuous supporting policies from the government, we anticipate a bottoming out in Chinese stock market.”

Vey-Sern Ling, managing director at Union Bancaire Privee. 

• “CPI target of 3% is pretty good too, suggesting they want to end deflation but people may be skeptical whether they can meet the target”

On Debt Issuances:

Guannan Zhou, chief fixed income analyst at Huachuang

• China’s plan to issue 1 trillion ultra-long special government bonds this year is in line with market expectations
• The fiscal deficit ratio is set at 3%, which is also in line with the amount of bond issuance this year. Looking at the future market movement, more easing policy is expected; the yield of 10-year CGB and 30-year CGB may still go down, but has limited room for downside

Ju Wang,  head of greater China FX/rates strategy at BNP Paribas

• “Some ultra-long bond issuance may help to support longer-dated yield, but we also believe PBOC’s monetary policy easing will be measured. Hence we don’t think yields curves can steepen significantly
• “Duration rally may take a short-term pause while FX is still in a holding pattern. We think duration rally could pause as a positive equity rally may delay imminent OMO rate cut and ultra-long bond supply may start to lift long-end yield
• “In FX, fixing pattern hasn’t changed and hence no adjustment in the two-way range view in USD/RMB yet; this will also somewhat limit PBOC’s policy room”

Xiaojia Zhi, head of research at Credit Agricole CIB:

• The planned issuance of special RMB1tn CGB in 2024, months after China’s extra RMB1tn CGB issuance announced last October, is a positive sign that the central government is willing to step up their responsibility, expanding their balance sheet for fiscal spending
• This is much needed when local governments are increasingly fiscal constrained given the structural shortfalls in land sales.
• The probability is rising that special CGB issuance could become a regular program in the coming years, along China’s continued efforts to enhance local debt risk controls to rein in risks.

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