 Numerical growth target: Will it be abandoned?

We expect the government will not announce a numerical growth target for 2021, like it did in 2020. We forecast China’s 2021 growth at 9.2%, and that China will match the size of the US economy around 2030.

 What are primary growth drivers in 2021?

With the recovery of household income, successful pandemic control, and vaccine availability, we expect a growth rotation from investment to consumption and from manufacturing to services in 2021.

 China’s export share spiked in 2020. Will it continue in 2021?

Solid global recovery in 2021 should boost demand for Chinese exports, though normalization in global production may lead to moderate correction in China’s world export share to around 15%.

 What to expect from policy normalization?

Policy normalization includes modest fiscal consolidation (a fiscal drag of 2.2% of GDP), a credit slowdown (lower TSF growth by ~2%-pts), the end of regulatory forbearance, and debt stabilization efforts.

 Will deleveraging efforts trigger credit stress?

No, we think the policy will find a balance between market discipline and financial stability. Risks are misinterpretation and over-execution in policy implementation.

 Why we expect lower interest rates?

Our non-consensus forecast of lower interest rates is based on our forecast of low inflation and weak reflationary momentum, reduced supply of government bonds, debt burden, and CNY appreciation pressure.

 Will CNY appreciation continue into 2021? .

Solid current account surplus, favorable interest rate differentials, and diminished risks of tariff escalation under a Biden administration suggest the CNY will appreciate to 6.25 against the USD in 2021, with the appreciation pressure frontloaded in 1H21.

 How will the 14th Five-Year-Plan shore up domestic loop?

Dual circulation is based on further reform and openness. Areas of opportunity include consumption upgrading, innovations, digitalization of the economy, and green investment.

 How will US-China relationship evolve?

The Biden administration will bring changes in tactics, and lower tail risk. Nonetheless, US-China super-power competition will continue, with limited areas of cooperation.

 What is the role of China for EM?

China will continue to expand its role in global growth, globalization, and cross-border investment. China will continue to be central to the future of EM.