Politburo signals economic policies to stay on course
On Friday – as expected – the Politburo held its quarterly econ-focused meeting, laying out what economic support is in the pipeline.
First, the Politburo promised to speed up implementation of fiscal and monetary policies, including by:
- Accelerating the issuance and use of government bonds
- Cutting interest rates and the reserve requirement ratio "when appropriate"
Second, it pledged to continue supporting consumption, most notably through:
- “Increasing financial support and expanding and enhancing implementation of the trade-in programs”
The Politburo also promised to promote services consumption.
Third, the Politburo announced targeted support for businesses hurt by the trade war, including:
- Increasing unemployment insurance fund rebates
- Providing access to cheap credit
Finally, Party leadership signaled willingness to roll out additional stimulus if needed:
- “[We will] introduce additional policies in a timely manner in response to changing circumstances, and strengthen counter-cyclical adjustments.”
Get smart: Most of these policies aren't new – instead, the Politburo is focused on speeding up implementation of existing policies.
- This is precisely what we predicted – China's robust Q1 GDP growth has given policymakers breathing room to watch how the trade war evolves before crafting new policy support.
Get smarter: The Politburo's emphasis on promoting services consumption – and the commitment to expand consumption subsidies – suggests policymakers may subsidize consumption of services like travel or dining.
Get even smarter: While we feel pretty good about this meeting readout, the absence of new policy support will leave markets disappointed.