Asia Pacific Economic Research03 January 2024J P M O R G A Nwww.jpmorganmarkets.comContentsExecutive summary21. What is the government�s policy framework? 32. How will fiscal and monetary policy coordinate? 43. Will the housing market stabilize in 2024?64. What to watch for on financial stability, other than local government hidden debt? 85. What will drive consumption? 106. Will deflation end in 2024?127. Which sectors will benefit from the structural transformation?138. How will external conditions evolve?159. Will China�s role in global supply chains change?1710. How will the US-China relationship evolve in 2024?19Emerging Markets Asia, Economic and Policy ResearchHaibin Zhu(852) 2800-7039haibin.zhu@jpmorgan.comBloomberg JPMA HZHU Grace Ng(852) 2800-7002grace.h.ng@jpmorgan.comTingting Ge(852) 2800-0143tingting.ge@jpmorgan.comJi Yan(852) 2800-7673ji.yan@jpmorgan.comJPMorgan Chase Bank, N.A., Hong Kong Branch1. What is the government�s policy framework? Growth-friendly policy will continue in 2024, but large scale stimulus is unlikely due to multi-dimensional discrepancies in assessments from policymakers vs. investors. 2. How will fiscal and monetary policy coordinate? The divergence between contractionary fiscal policy and accommodative monetary policy seen in 2023 will not be repeated in 2024, as fiscal policy will turn expansionary. Monetary policy will support fiscal operation via liquidity management and expanded PSL and re-lending.3. Will the housing market stabilize in 2024? The housing market correction will likely continue, as both demand and supply-side challenges persist. Public housing is important to mitigate the housing drag. 4. What to watch for on financial stability, other than local government hidden debt? Regional banks may face increasing pressure from credit quality concerns, NIM compression and capital adequacy pressure.5. What will drive consumption? Income growth, adjustment in household saving rate, and whether the government will introduce consumption stimulus. 6. Will deflation end in 2024? Deflation will end in 2024, but low inflation will stay. 7. Which sectors will benefit from the structural transformation? The government prioritizes technological innovations and modernizing the industrial system, but needs to find a balance in the transformation process.8. How will external conditions evolve? We expect exports will stabilize, portfolio outflows will moderate and CNY exchange rate will show two-sided volatility.9. Will China�s role in global supply chains change? The focus has shifted from “just-in-time� to “just-in-case� considerations. China will remain an important manufacturing hub but its dominant role will weaken.10. How will the US-China relationship evolve in 2024? Strategic competition still prevails, and will stay complicated into the election year. Geopolitical concerns centre on Taiwan and South China Sea.See page 20 for analy...
