MARKET OVERVIEW - Lack of Clear Strategy for China's Real Estate Sector and Inflation Sparks Disappointment

Goldman Sachs analysts stated that China's upcoming provincial and national "Two Sessions" meetings could be the next significant macro policy catalyst, following the limited messaging from the CEWC. According to the analysts, while it is somewhat positive that policymakers emphasize prioritizing consumption and plans to increase birth rates, the lack of a clear, actionable strategy to stabilize the real estate sector and normalize inflation is disappointing. Goldman Sachs suggests that Beijing could raise its official budget deficit target for 2025 from 3.0% of GDP in 2024 to 3.6% or higher. Additionally, the central government could increase its special bond issuance package from 1 trillion CNY to 2.5 trillion CNY, and local governments could raise their special bond issuance from 3.9 trillion CNY to 4.7 trillion CNY.