Politburo meeting calls for more economic support

Macroeconomic support is on the way.

• That’s the big takeaway from July’s econ-focused Politburo meeting, which took place on Tuesday.

The Politburo kicked off its meeting by identifying two of the big challenges facing the economy:

• “Domestic effective demand is insufficient.”
• “[Challenges] in the external environment have increased.”

In response, officials signaled more supportive economic policies are coming:

• “Counter-cyclical regulation must be strengthened, and active fiscal policies must be implemented.”
•  “We must launch a batch of incremental policy measures as soon as possible.”

The Politburo wants this policy support to “focus on boosting consumption.”

• “The focus of economic policies should be more on benefiting people's livelihood and promoting consumption.”

One thing notably absent from the meeting readout: Policy support for the real estate sector.

• The Politburo meeting reaffirmed the government’s (largely unsuccessful) strategy of purchasing unsold properties, but didn’t indicate any new measures are in the pipeline.

Get smart: The meeting readout was uncharacteristically blunt in its assessment of the economy and its demands for more policy support.

• The call for more active fiscal policy means infrastructure spending will increase in H2.
• The emphasis on boosting consumption suggests that an expansion of the consumer trade-in initiative is likely; officials may also roll out targeted measures like consumption vouchers or subsidies to promote domestic tourism.

Get smarter: We’re doubtful this support will catalyze a sustained increase in consumption.

• Consumer confidence and spending will remain muted until the property sector picks up.
• Without more aggressive property sector support measures, that pick-up is at least six months away.