GS--China: Third Plenum preview: A gradualist reform plan for the “post-property era”
应用介绍
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Bottom line:
The Politburo announced the Third Plenum will be held on July 15-18 in its June
meeting today (June 27). In our view, the reform focus at the Third Plenum will likely
the “post-property era”. Rather than a “big bang” policy initiative, we expect a
continuation, or even scale-up, of existing reform measures on a multi-year horizon.
These may include fiscal and financial reforms to contain systemic financial risks and
prevent negative spillovers from the prolonged property downturn, as well as
continued support for emerging industries and urbanization to boost China’s
long-term growth. Specifically on fiscal/tax reforms, we expect more signals on
central government borrowing, local government debt resolution, and future tax
system reforms. Consumption tax reform may be part of China’s fiscal reforms – this
could have long-term benefits, but the implementation will likely be gradual. Our
recent client conversations suggest clients hold low expectations for major structural
reforms from the Third Plenum. Due to the long-term nature of the Third Plenum
agenda, we think it will take time for policy specifics to be formulated and the
reforms announced to be implemented.
Main points:
1. Two important policy meetings for China – the Third Plenum of the 20th Chinese
Communist Party (CCP) Central Committee and the July Politburo meeting – will be
held in July. The former will focus on outlining major reform agendas to address
structural issues in the economy for at least the next five years, while the latter will
focus on evaluating the current state of the economy and making cyclical policy
arrangements for the remainder of this year. In its June meeting today (June 27), the
CCP Politburo announced the Third Plenum will be held on July 15-18. Despite a lack
of details on specific reform measures in the briefing, recent articles written and
meetings held by President Xi suggest that the Third Plenum will likely lay out
economic and social reforms designed to help the country achieve “Chinese path to
modernization” (中国式现代化; Exhibit 1).
2. In our view, the reform focus at the Third Plenum will likely be on both “containing
left-tail risks” and “growing right-tail potential” for China in the “post-property era”
(where the property sector is no longer a major driver of growth, and government
finance is less reliant on property-related revenue)
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