Amidst the Trump and China constant dramatic flows we might forget that the China economy is key. The development of a Socialism with Chinese Characteristics is at the centre. The Xinhua report on the annual Central economic work Conference is at the end. Before that – although you might read the Xinhua first – is the interesting analysis of Dr Shirley Yu:
“Stability” appeared 30 times in China’s Annual Central Economic Work Conference report. Conference concluded yesterday, ahead of looming clarity on the US-China trade negotiations.
Amidst downward economic pressure, stability is the overarching economic objective. Six areas of stability include employment, finance, trade, FDI, investment, and growth expectations.
China is to be “well prepared for a contingency plan” for 2020, an echo of the philosophy of “struggle” President Xi laid out in September. This contingency plan would not be an alternative to the China Model. More likely, it would be a contingency plan to address US-China decoupling in technology, capital market, currency, and trade areas.
The policy stance towards China’s real estate market will continue under President Xi’s guidance that “houses are for living in, not for investment”. This is consistent with “stability“, to guide the property market away from overheating or overcooling. In the statement, it allowed local governments flexibility.
Proactive fiscal policy and prudent monetary policy for 2020 is consistent with previous language. CPI hit 4.5% in November year over year, and third quarter GDP growth rate slid to 6%. This signifies the policy complexity for 2020 in both stimulating sufficient growth, and simultaneously containing inflation, increasingly a stagflation scenario. Ensuring ample liquidity is stressed. Policy direction has shifted from financial deleverage in previous years to maintaining stable leverage in this report. This will mildly alleviate financial distress in some high-leveraged and liquidity-strained private companies.
Poverty elimination and pollution reduction are two of the three primary “tough battles” to win.