Huatai Macro (华泰宏观) says that the October meeting of China’s top political authority signals further weakening of Beijing’s deleveraging campaign as stabilisation of the economy rises to the fore, as well as potential loosening of real estate controls and greater focus on capital markets.
Huatai previously said that the meeting of the Chinese politburo held on 31 July signalled that “in the second half stability would dominate,” while also forecasting a gradually weakening of Beijing’s deleveraging campaign.
According to Huatai the October meeting of the politburo indicates that its overall stance remains unchanged.
“We believe that the October politburo meeting is an extension of the viewpoint of the July meeting, and policies will continue to focus on the term ‘stability,’ with the vigour potentially further increasing.”
“The current meeting of the politburo points out that downward pressure on the economy is increasing, with some enterprises seeing sudden risk in their operations.
“The external environment is undergoing change…forecasts of a weakening in global recovery are perhaps gradually being proven false, but Sino-US trade conflicts and other variables could put negative pressure on growth.
“In future stabilisation of growth will likely gradually become a key point of policy, and infrastructure investment will still be a key demand-side hedging tool.
“In future if downward pressure on the economy continues to increase, our assessment is that there the possibility of a loosening of real estate control policies in first-tier and some second-tier cities.”
Huatai also sees greater focus on reform of capital markets.
“The meeting calls for strengthening of systems development, stimulation of market vigorous and expediting the healthy long-term growth of capital markets, with a focus on capital market reforms.
“The meeting makes especially reference to the development of capital markets, embodying a focus on stimulative liquidity…prior to this central government financial regulators issued a slew of policies to ease private-enterprise debt risk and expedite reform of securities markets.”