On Friday, China’s Politburo held its meeting to preview the upcoming Central Economic Work Conference (CEWC), which lays out the economic policy agenda for the following year. See our preview of the CEWC HERE.
The CEWC typically follows the Politburo meeting by 2-9 days. It seems likely that the CEWC will be held in the Dec. 15-18 window, after Xi Jinping’s trip to Vietnam (Dec. 12-13). It is less likely that the meeting will happen before Xi’s trip this Tuesday.
In terms of previewing the CEWC, my initial read is that the messages from the Politburo were not strongly diagnostic in terms of what we should expect on key policies. There is a focus on supporting growth next year, including phrases such as “increase macro-control efforts” and “strengthen counter-cyclical and inter-cyclical adjustment of macroeconomic policies.” However, the tone of the meeting did not suggest a critical urgency in this regard, saying that “the economy has rebounded and is developing with high quality” and not betraying deep concern over employment, for example. There was little to suggest a major departure from current policy settings.
Overall, it suggests a moderate step up in support policies and not major shifts in terms of the scale of stimulus or the approach. When it comes to key decisions such as where Beijing will set the GDP growth target and the size of the fiscal deficit, we will have to wait for the CEWC. As of now, however, the statement did not lean into language suggesting big upside surprises on growth and stimulus expectations. It is broadly consistent with our basecase expectations for the CEWC, which in turn imply an economic recovery next year that remains subdued.
On macro policies, key phrases include pledges to:
- “Continue to implement proactive fiscal policies and prudent monetary policies.” Message: overall continuity.
- “Proactive fiscal policy must be moderately strengthened, improve quality and efficiency.” This is consistent with other recent signals of stepped up central government support for infrastructure and other spending, but moderate in scale.
- “Prudent monetary policy must be flexible, appropriate, precise and effective.” This suggests monetary policy will stay supportive but with limited room for major easing, particularly when it comes to broad measures such as rate cuts.
- “It is necessary to enhance the consistency of macro policy orientation and strengthen economic propaganda and public opinion guidance.” It is hard to tell exactly with this means, but to me it sounds like: “We need to stay the course and do a better job explaining to people why they should be happy with it” – that is, not entirely encouraging in terms of a shift in approach.
- The meeting pledges support for consumption but nothing new. As expected, there is no indication that we will see direct fiscal stimulus to Chinese households.
- Property is not mentioned directly. Clearly there will be significant support for property, especially through affordable housing programs, but China’s leadership does not view real estate as a key stimulus tool and is not willing to reflate the sector to achieve short-term growth goals.
The other broad themes in terms of economic development goals remain consistent from last year, including a strong focus on industrial policy goals that boost more secure supply chains and technological self-reliance.
