China Politics December 2017

China

China: Key economic policy challenges likely to be addressed at upcoming Communist Party meeting

December 14, 2017

Officials from the Communist Party of China (CPC) will gather in the coming days to set China’s economic policy for the upcoming year at the Central Economic Work Conference (CEWC). The CEWC, like other CPC events, has no publicly fixed schedule, and authorities only report about the event after it is completed. Analysts believe, however, that China’s top economic body will gather in the third week of December. The meeting will follow the 19th Party Congress in October, in which long-term policy objectives and guidelines for China were spelled out.

Despite the secrecy around the CEWC, a CPC Politburo meeting on economic policy held on 11 December, and chaired by President Xi Jinping, signaled that the all-important meeting will focus on three main areas. Authorities stressed that they will contain financial leverage and seek to ensure that the financial sector effectively supports the real economy to reduce major risks such as soaring corporate debt. Reducing poverty and significantly cutting pollution will be the other two pillars for next year. Although it provided few details, the Politburo cited housing market reform as another area that policymakers will focus on. Overall, the statement emphasized that policies will be enacted to transition China’s economic development from rapid growth to a high-quality and sustainable economic model.

While no comments were made about the growth target for next year, authorities are likely to maintain the 6.5% figure set for 2017. Policymakers will, however, likely soften the wording from last year’s statement by dropping the pledge to beat the growth target to reflect ongoing efforts to deleverage the economy and curb pollution. The inflation target is expected to be maintained at 3%. That said, the inflation target has lately been a ceiling more than a target.

The CEWC is an annual meeting that is used to set the tone for monetary and fiscal policies as well as establish the economic targets for the coming year. The meeting is convened by top government officials and CPC leaders. The economic targets and measures are officially released at the annual National People’s Congress, which is traditionally held early in March. However, they are usually leaked after the CEWC.

Economic fundamentals in China are expected to remain healthy next year, thereby limiting any meaningful overhaul of the macroeconomic policies currently in place. Authorities will likely keep a slight tightening bias to their monetary policies to contain fiscal risks, while keeping growth afloat. Moreover, the ongoing campaign to step up China’s environmental regulations will continue to exert downward pressure in certain industrial activities, such as steel and mining.


Author: Ricard Torné, Lead Economist

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