Sunday, July 23, 2023

"China’s Top Leaders Likely to Disappoint on Big Bang Stimulus"

From Bloomberg via Yahoo Finance, July 23:

China’s top leaders will fail to deliver big-bang stimulus for the weakening economy this week, economists say, disappointing financial markets seeking strong action to counter the downturn.

The July meeting of the Communist Party’s Politburo, the top decision-making body led by President Xi Jinping, usually covers economic policy. Senior officials typically don’t announce specific measures at these meetings, but the policy tone and language of the statement will provide important clues on how Beijing will respond in coming months.

Economists say the meeting will likely provide more pro-growth signals, which may lead to greater fiscal spending, moderate interest rate cuts and additional property easing. Support for the private sector could be top of the agenda after Beijing’s recent pledges, they say.

The meeting will likely “refrain from giving ‘strong medicine’ to the economy,” said Bruce Pang, chief economist and head of research for Greater China at Jones Lang LaSalle Inc. “There won’t be much aggressive stimulus policies that markets were expecting.”

Investors are already tempering expectations and bracing for prolonged gloom in the stock market. The benchmark index notched its worst week in four last week despite several pledges recently by Beijing to boost consumption and support businesses.

Authorities are resisting the kind of stimulus they’ve unleashed in past downturns to avoid over-stimulating the property market and driving up debt for already highly-leveraged local governments. Beijing is focused on improving the quality of growth, rather than the pace, and set a relatively conservative target of around 5% for this year — which it’s still largely on track to achieve.

Here’s a look at what economists expect from the Politburo meeting:

Fiscal Policy....