China's economy is currently facing a range of difficulties and challenges, according to the Politburo, the Communist Party's top decision-making body. These challenges include insufficient domestic demand, operational difficulties for certain enterprises, risks and hidden dangers in key areas, and a complex and grim external environment.[0] The statement was made following a meeting chaired by President Xi Jinping.[1]
One notable omission from the meeting's statement was the official slogan of “housing is for living, not for speculation.”[2] This omission was seen as a positive sign by investors, as it could alleviate concerns about financial stress in the property industry.[3] Analysts expect more easing measures at the local government level to be implemented in the near future.[3]
The Politburo also vowed to optimize and adjust policies for the property sector, stating that there have been “fundamental changes” in the demand and supply of the housing market. This shift in policy direction indicates a deeper support for the property market.[4]
In addition to addressing the challenges in the property sector, China's top leaders pledged to boost domestic consumption demand, resolve local debt risks, and elevate stable employment to a strategic goal. They also stated their commitment to implementing a counter cyclical policy and maintaining a prudent monetary and proactive fiscal policy.
The July Politburo meeting is closely watched as it sets the tone for China's economic policies for the second half of the year.[0] Market watchers are eagerly awaiting firmer guidance on policy support to address the faltering growth in the world's second-largest economy.[0]
China's ultra-long government bonds are experiencing increased demand as expectations for modest stimulus and the economy's dire outlook drive bets for further gains.[5] This heightened demand reflects the market's anticipation of potential policy measures to support economic growth.[6]
Despite the challenges currently facing China's economy, officials at the meeting reiterated that the nation's economy has significant resilience and potential. They emphasized the need to continue deepening reform and opening-up, improving the core competitiveness of state-owned enterprises, and creating a favorable environment for the development of private enterprises.[7] Additionally, they vowed to keep the yuan exchange rate stable and adjust and optimize property policies at the appropriate time to promote a sound and stable development of the property market.[7]
Overall, the statement from the Politburo highlights the various difficulties and challenges currently faced by China's economy. However, it also underscores the government's commitment to addressing these challenges through policy adjustments and measures to support key sectors and promote domestic consumption.
0. “China vows to optimize property policy in tortuous economic recovery” CNBC, 24 Jul. 2023, https://www.cnbc.com/2023/07/24/china-vows-to-optimize-property-policy-in-tortuous-economic-recovery.html
1. “China pledge to step up policy support underpins rally in oil and Chinese equities” ForexLive, 24 Jul. 2023, https://www.forexlive.com/news/china-pledge-to-step-up-policy-support-underpins-rally-in-oil-and-chinese-equities-20230724/
2. “Xi’s Housing Speculation Warning Left Out of Politburo Statement” Yahoo News, 24 Jul. 2023, https://news.yahoo.com/xi-housing-speculation-warning-left-110408101.html
3. “China Developers Jump Most in Seven Months on Politburo Pledge” Bloomberg, 25 Jul. 2023, https://www.bloomberg.com/news/articles/2023-07-25/china-developers-jump-most-in-seven-months-on-politburo-pledge
4. “Xi's Housing Speculation Warning Left Out of Politburo Statement” Bloomberg, 24 Jul. 2023, https://www.bloomberg.com/news/articles/2023-07-24/xi-s-housing-speculation-warning-left-out-of-politburo-statement
5. “China’s Ultra-Long Bonds Are All the Rage on Economic Gloom” Yahoo Finance, 21 Jul. 2023, https://finance.yahoo.com/news/china-ultra-long-bonds-rage-220000294.html
6. “Commodities : China's Top Leadership Pledges More Policy Support to Aid Economy” Marketscreener.com, 24 Jul. 2023, https://www.marketscreener.com/news/latest/China-s-Top-Leadership-Pledges-More-Policy-Support-to-Aid-Economy–44400023/
7. “China’s Politburo: Will continue to implement prudent monetary policy” FXStreet, 24 Jul. 2023, https://www.fxstreet.com/news/chinas-politburo-will-continue-to-implement-prudent-monetary-policy-202307240919
