Politburo Highlights Potential For Monetary Easing And Further Support For Housing

The initial round of post-meeting comments from April’s Politburo covered well-known risks and policy focus areas. There was a continued focus on reform, economic challenges, the need to extinguish debt-linked risks and support for demand.

• The Politburo also highlighted the potential for both policy rate & RRR cuts going forwards. Most China watchers already looked for further monetary easing during ’24, but the comments may deepen/front load expectations for looser monetary policy in Q2.
• The Politburo then went on to stress the need to expedite ultra-long bond issuance and the use of special bonds.
• The readout then flagged that China will study steps to digest the existing housing stockpile. This was probably the most interesting part of the release, with the property overhang continuing to hamper the embattled sector.
• A reminder that recent days have seen increased speculation re: deeper property sector support, this adds credence/momentum to those ides.
• CGBs yields softened on those headlines, as the potential for deeper policy support (housing and monetary) and focus on lower broader funding costs dominated, even with the Politburo wanting to expedite special bond issuance.
• Equities of Hong Kong listed developers rallied on the headline.
• When it came to broader policy settings, the Politburo reiterated the need for fiscal policy to remain “proactive” and monetary policy to remain “prudent,” although the descriptions surrounding the policy levers were seemingly shortened.
• Some of the wording surrounding fiscal policy pointed to the potential for greater support on that front.
• A reminder that Chinese local markets are closed Wednesday through Friday owing to the observance of a public holiday.