With China's annual parliamentary meeting just around the corner, leaders are under immense pressure to implement bold policies that will safeguard the economy's long-term growth. This pressure marks the most significant challenge in nearly a decade, reminiscent of the turmoil faced in 2015.

The beginning of this year witnessed a sharp decline in Chinese stocks to levels not seen in five years, coupled with deepening deflation reminiscent of the global financial crisis. Economists draw parallels with the 2015 crisis that prompted policymakers into action.

Tommy Wu, a senior economist at Commerzbank, emphasized the critical nature of 2024 for China's economic stability, acknowledging the complexity of the current situation. In 2015, China navigated the crisis through measures such as devaluing the yuan, tightening the capital account, and boosting investment in property and infrastructure while reducing interest rates significantly.

However, the efficacy of these measures is now limited, leaving policymakers with fewer options to address the current economic challenges. The property market has been in decline since 2021 due to defaults among developers, and sustaining infrastructure spending is challenging owing to high levels of local government debt.

Further monetary easing could lead to a devaluation of yuan assets and exacerbate deflationary pressures. As the National People's Congress (NPC) convenes its annual meeting on March 5, there's uncertainty about significant stimulus or reform plans.

Logan Wright, a partner at Rhodium Group, highlighted Beijing's constraints in stimulating the economy through fiscal policy or credit growth from banks. The absence of clear strategies to address structural issues, including property sector cleanup and debt restructuring, frustrates investors seeking long-term plans for sustainable growth.

While the NPC typically sets economic targets, analysts warn that without new policies to redirect resources to households, setting targets akin to last year's could undermine confidence. Consumer confidence remains low, posing a significant challenge to economic recovery.

Premier Li Qiang is expected to outline economic targets for 2024 during the NPC meeting, but without substantial policy shifts, analysts fear these targets may fail to instill confidence or stimulate growth.

China faces mounting pressure to enact robust policies that steer the economy towards sustainable growth, particularly amidst challenges in the property market, infrastructure spending, and consumer confidence.

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