MNI: China Politburo Likely To Focus On Economic Boost In H2

China’s quarter-end politburo meeting expected this week is likely to emphasise moderating inflation and supporting employment as acceptable economic goals for the remainder of 2022, and further housing stimulus and adjustments to the zero-Covid policy which sapped first half output, but officials are unlikely to openly abandon the annual growth target of about 5.5%, analysts said.

During the meeting, senior policymakers would set the tone for economic policy for the rest of the year, signaled by any wording changes compared to the previous meeting in April.

DOWNPLAY GDP TARGET

After the economy grew only 2.5% in H1, China needs to deliver a growth rate of more than 8% in H2 to hit the target, which is widely believed unrealistic.

But China should not explicitly give up the 5.5% target to maintain a sense of urgency to boost the economy in the second half of the year, wrote Li Zongguang, chief economist of China Renaissance in a research note. Top policymakers are more likely to urge all parties to ensure the economy operates within a reasonable range, especially to stabilise prices and achieve employment goals in H2, said Li.

He added that slower GDP, such as 4% or more, is acceptable, if prices are stable and new jobs are added. China has aimed to keep the 2022 inflation below 3% and created 11 million new jobs this year.

Following a speech by Premier Li Keqiang last week that China will not impose a massive stimulus, or excessive monetary easing and not place an overdraft on the future for an overly high GDP target, the market has lowered expectations for any big easing moves by the central bank in the short-term, including policy rate cuts. MNI: China Likely Target H2 GDP Above 5%, Avoid Big Stimulus

China Renaissance’s Li expects there may still be room for a cut to the reserve requirement ratio in H2. While on the fiscal side, it is more likely to front-load CNY1.5 trillion of next year’s local government special bonds to H2, as other measures like raising the deficit-to-GDP ratio and issuing trillion-level special treasury bonds could easily be interpreted as “flooding with excessive liquidity”, said Li. MNI STATE OF PLAY: China 5-Yr LPR Eyed As Policy Turns Cautious

RELAXATION

Recent mortgage boycotts on unfinished housing projects across the country are further pressurizing the still bleak real estate sector. Following the State Council executive meeting last week that reiterated to ensure meeting buyers’ housing demand, the stance on real estate should be more positive, said Xiong Yuan, chief economist at Guosheng Securities, expecting further substantial easing. MNI: China Eyes Plans On Unfinished Housing Units Amid Boycotts

Meanwhile, there will be more emphasis on boosting infrastructure investment, urging for more physical workloads, said Xiong. The promotion of consumption should also be highlighted with more issuance of consumer coupons, to drive spending on automobiles and home appliances.

It is also worth noticing how would top policymakers position the platform economy, noted Li with China Renaissance, who believes Didi, China’s ride-hailing giant being fined USD1.2 billion last week marked the end of rectification on Internet platforms.

COVID POLICY

However, the dynamic zero-Covid policy should still be emphasized till the year-end 20th Party Congress, especially amid the spread of a more contagious sub-variant of Omicron. But it is clear the economy will find it hard to bear the cost of any other large-scale lockdowns of core cities, said Li of China Renaissance.

Xiong agreed that the pandemic control in H2 will better balance stabilizing economic growth.