China’s rare move of not setting an annual growth target this year will not have a major impact on projections of Philippine companies which are themselves reeling from uncertainties as a result of the coronavirus disease 2019 (COVID-19) pandemic.
ATR Asset Management chief investment officer Philip Hagedorn said he is not worried that Beijing decided not to give gross domestic product targets anymore but he added “we need the Chinese economy to recover fast because all local industries have some exposure in it.”
“We’ve always questioned their numbers anyway,” Hagedorn indicated in a television interview.
The analyst said the market had discounted a 15 to 20 percent drop in earnings this year but the effects on the bourse can be cushioned by companies seeking to hold initial public offerings if the Philippine Stock Exchange allows “other companies list with less stringent hoops to jump through.”
Hagedorn, moreover, issued a warning that local companies should be prepared to see bad earnings. “The numbers will be pretty bad, Jollibee is still a good value play, Philippine Airlines needs to get back in the sky as staying on the ground costs money for airlines,” he added.
Chinese Prime Minister Lee Keqiang said the Asian giant has forgone the target setting process after the coronavirus battered the world’s second-largest economy and ravaged global growth.
Instead, given “great uncertainty” caused by the COVID-19 pandemic, Beijing will “give priority to stabilising employment and ensuring living standards”, Li told the opening of the National People’s Congress.
It is the first time in recent years that officials have decided not to issue a numerical growth target, which is typically seen as a signal of the resources leaders are willing to spend to shore up the economy.
Li said China is “keenly aware of the difficulties and problems” the country faces, with COVID-19 sending the world economy into recession.
He also announced that China’s fiscal deficit was expected to be over 3.6 percent of gross domestic product this year, with a deficit increase of 1 trillion yuan ($140 billion) over last year.
Another 1 trillion yuan of government bonds will be issued for COVID-19 control, he added, calling these “extraordinary measures for an unusual time”.
The two trillion yuan will be transferred in full to local governments, with the funds to be primarily used for ensuring employment, meeting basic living needs, and protecting market entities, said Li.
He also said governments at all levels should “tighten their belts”, and that all types of surplus, idle and carryover funds will be withdrawn and re-allocated, to be put to better use.
$526B from local bonds
Beijing will also issue another 3.75 trillion yuan ($526 billion) in special local government bonds this year in a bid to boost infrastructure spending in the virus-hit economy.
China has said it will tap its massive domestic consumer market to support the economy after external demand collapsed.
But the official urban unemployment rate rose to six percent last month, with analysts saying the real figure could be even higher.
Li’s work aims to ensure the urban unemployment rate remains around this figure, through the creation of over nine million new jobs.
The Communist Party has long staked its legitimacy on delivering jobs and prosperity in return for public acquiescence to its political monopoly.