BEIJING – China will step up policy adjustments to support an economic recovery in 2024, state media said on Tuesday, following an agenda-setting meeting of the country’s top leaders.

Investors are closely watching for clues on next year’s policy and reform agenda as Beijing has been struggling to spur a post-pandemic economic recovery amid a deepening housing crisis and mounting local government debt.

China will focus on boosting effective demand next year, and make concerted efforts to spur domestic demand, state media said, citing the annual Central Economic Work Conference held from Dec. 11-12, during which top leaders set economic targets for 2024.

“We must introduce more policies that are conducive to stabilizing expectations, stabilizing growth, and stabilizing employment,” state media said, quoting top officials led by President Xi Jinping at the meeting.

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“It is necessary to strengthen counter-cyclical and cross-cyclical adjustments of macro policies, continue to implement a proactive fiscal policy and a prudent monetary policy, and strengthen innovation and coordination of policy tools.”

The Politburo, a top decision-making body of the ruling Communist Party, said on Friday that fiscal policy would be moderately strengthened and will be “flexible, moderate, precise, and effective” to help spur the economic recovery.

China plans to implement structural tax and fee cuts, and plans a new round of fiscal and tax reforms, state media said, adding that the government will improve the structure of fiscal spending to support strategic tasks.

China will maintain reasonable and sufficient liquidity, and ensure that the scale of social financing and money supply match the expected goals of economic growth and price levels, according to state media.

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China will guide financial institutions to increase support for technological innovation, green transformation, inclusive small and micro businesses, and the digital economy.

The government is likely to rely on fiscal stimulus, especially spending on infrastructure, to drive growth, as the central bank still faces limited space to ease policy due to concerns over capital outflows, analysts say.

In October, China unveiled a plan to issue 1 trillion yuan ($139 billion) in sovereign bonds by the end of the year, raising the 2023 budget deficit target to 3.8% of GDP from the original 3%.

“Fiscal policy will focus on stabilising investment to help offset the decline in real estate and external demand,” said Nie Wen, an economist at Hwabao Trust.

“Moderate cuts in the reserve requirement ratio (RRR) and interest rates are expected.”

2024 growth target eyed

Top leaders also pledged to “to facilitate stability through progress”, which may signal greater emphasis on growth, and “establish first before demolishing”, which could indicate more support for the troubled property sector.

“To further promote economic recovery, we need to overcome some difficulties and challenges,” state media said. “The main problems are insufficient effective demand, overcapacity in some industries, weak public expectations, and many hidden risks.”

Last week, Ratings agency Moody’s slapped a downgrade warning on China’s credit rating, saying costs to bail out debt-laden local governments and state firms and control its property crisis would weigh on the growth outlook.

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Prior to the meeting, government advisers had told Reuters they would recommend economic growth targets for 2024 ranging from 4.5 percent to 5.5 percent, with the majority favoring a target of around 5 percent – the same as this year.

The government may set a growth target of around 5 percent for 2024 sources said. Hitting such targets would require Beijing to step up stimulus given that this year’s growth has been flattered by last year’s low-base effect of COVID-19 lockdowns, analysts say.

Top leaders traditionally endorse a growth target at the December meeting, which is then publicly announced at the opening of the annual parliament meeting, usually held in March.

China’s growth is see on track to hit the government’s target of around 5 percent this year.

China will speed up the establishment of a new model of property development, quickening construction of affordable housing, and coordinate the resolution of local debt risks and stable development, according to state media.