Deleveraging Left Off the Agenda of China’s Top Political Meeting

November 6, 2018

 

China’s deleveraging campaign was dropped from the agenda of a regular economy-focused meeting of one of China’s top policymaking bodies on Wednesday, while support for the private sector was emphasized. The Communist Party’s Politburo, a 25-member high-level political body headed by President Xi Jinping, meets every month to set the tone of the government’s policymaking. The meeting is dedicated to the economy about every three months. The official account of the meeting published by state showed a greater acknowledgment of downward pressure on the economy than those accounts published after the previous few meetings. China’s manufacturing purchasing managers index slid to 50.2 in October, the lowest reading since July 2016, which added to concern about the economic health of the world’s second-largest economy.

 

China’s gross domestic product grew 6.4% year-on-year in the third quarter, the weakest expansion since the first quarter of 2009. The fact that deleveraging wasn’t mentioned by the Politburo may create more political space for looser policies.

 

Home prices were also off the agenda because the property market has been cooling down in recent months, and additional nationwide tightening measures are unlikely to be rolled out. Authorities have spoken of supporting the private sector recently amid a wave of takeovers of private business this year by state-owned enterprises. There were then heated arguments over claims that “the private sector is leaving the stage.” Xi promised in mid-October to offer “unwavering support” to the country’s private sector.

 

On Oct. 19, Vice Premier Liu He said that those who do not support the development of private enterprises “must be resolutely corrected,” and the central bank announced it will add $21.5 billion (RMB 150 billion) of relending and rediscount quotes to better serve the financing needs of micro and small businesses.

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