Pantheon On Politburo Meeting

The research house weighs in on the Politburo meeting. They note the targeted measures for both consumption and housing will be welcome from a market sentiment point of view, but represent incremental steps rather than abrupt policy turnarounds.

• "The Politburo meeting today said that China is facing new difficulties, “mainly due to insufficient domestic demand, operational issues at some enterprises, hidden risks in key areas, and a complex external environment”. In response, the top party body called for amplifying macro-policy regulation, a focus to expand domestic demand, boost confidence and prevent risks. "
  
• "Overall, the emphasis on domestic economic expansion harks back to the December Central Economic Work Conference, but recognising that the top issue now is insufficient demand, with poor sentiment close behind.
  Markets are likely to receive an initial boost from the Politburo’s stress on domestic demand support, especially consumption, including the specific mentions of autos, electronic products and home furnishing, as well as consumer services such as sports, leisure and cultural tourism. But what is missing is any hint of a U.S.-style government handout to households. "
  
• "This is targeted and incremental support for consumption, not a complete turnaround in policy approach. For this reason, the markets are liable to be disappointed as the various ministries issue concrete policies over the coming weeks and months. For instance, the NDRC on Friday issued new auto consumption measures, but they are modest compared with the small-engine car auto tax incentives in H2 2022. The new NDRC measures include asking cities with auto purchase quotas to increase the quotas and accelerating scrapping of high-emission vehicles. "
  
• "The section on the property market is only a notch more supportive. It acknowledges “major changes in the relationship between supply and demand in the property market” and calls for adjusting property policies in a timely manner. But this policy adjustment will be at the city level and targeted to support genuine housing demand, both first-time and upgrader. The readout is likely to provide a moderate boost for sentiment by dropping the phrase “houses are for living in, not speculation”, which was in the Q1 readout. But overall, the mid-year readout signals additional local-level targeted support for property, rather than an about-turn in policy approach. Stabilising property is seen as a risk management issue, and certainly not a stimulus channel, unlike in earlier cycles."