China’s Politburo ‘signals a pre-emptive stance’ to step up easing
2024.12.10 10:10
Investing.com — China’s Politburo has signaled a policy shift, announcing plans to adopt “moderately loose” monetary policy and “unconventional countercyclical adjustment” during its December meeting, according to a Bank of America note on Tuesday.
The bank said it marks the first time since 2011 that such language has been used, highlighting the urgency of addressing aggregate demand weakness and stabilizing key markets.
“It indicates the overall policy stance is stronger and more positive than that at the Sep 26 Politburo meeting,” said BofA.
The bank explained that the leadership emphasized its commitment to stabilizing the property and stock markets while addressing local government fiscal challenges.
BofA notes that specific measures are expected to be outlined at the upcoming Central Economic Work Conference (CEWC), although numerical targets for growth and fiscal stimulus likely won’t be announced until March’s National People’s Congress.
They believe monetary easing could include a reserve requirement ratio (RRR) cut, particularly before the Lunar New Year when liquidity tends to tighten.
However, a “near-term catalyst for fiscal policy would be potential continuation of the government subsidy on auto and appliance purchases,” said BofA, adding that there could be measures to boost local government expenditures and enhance efficiency.
Markets have responded positively to these developments, raising hopes for stronger consumer subsidies and further consumption boosts.
According to BofA, “more proactive” fiscal measures will likely complement monetary easing, with detailed strategies to be disclosed at the CEWC.
“Unless the US tariff shock turns out to be significant in size and early in timing, we believe further policy catalyst would probably have to wait until Two Sessions in March,” added the bank.
