China’s president Xi Jinping, a day after being bestowed the authority as the Communist Party’s “core” leader, chaired a meeting of the party’s political bureau on economic matters, signalling the importance he’s placed on tackling the country’s runaway lending and asset prices.
Top of the agenda during the Friday meeting was the need to “curb asset bubbles and safeguard against economic and financial risks,” while stressing the need to adopt proactive fiscal policy and prudent monetary policy, according to China’s state media.
The timing and the agenda of the Politburo meeting were particularly significant, coming fresh on the heels of Xi’s elevation, said Minsheng Securities’ analyst Yan Qing.
“There are usually only three Politburo meetings on economic matters and policies every year, in April, late July and early December,” Yan said. To have Xi chair a meeting at this time has “special significance,” he said.
The meeting has sent a “less dovish” signal to financial markets on curbing inflation, which “may help to explain the visible rise in interbank interest rate over the past 10 days,” Goldman Sachs wrote in a note on Sunday.
China’s benchmark seven-day repo rates rose to record 2.6624 per cent on Thursday, 4.73 basis points than the closing average in the previous week.
Property prices have been soaring among China’s biggest metropolitan areas, as easy loans by loosely regulated financial institutions have lured speculators to seek higher returns in fixed assets.
To curb asset inflation, the People’s Bank of China may set new rules to regulate the country’s wealth management products, which have been blamed for fueling runaway credits.
The central bank may instruct commercial banks to incorporate their off-balance-sheet wealth management products into the Macro Prudential Assessment (MPA) system, as a way to improve oversight of shadow lending, the Caixin financial website reported last week, citing sources at the central bank.
“We do not think this change in tone signals a dramatic change in policy stance. Concerns about a repeat of the 2013 liquidity crunch are certainly overdone because that was a one-off policy misfire, which we think is extremely unlikely to be repeated,” Goldman said in its research.
The government downplayed the country’s economic growth target, instead emphasising a programme to restructure the composition of the economy, forcing inefficient and unproductive industries to consolidate, Yan said, citing the wording of the post-meeting statement.
“The tone on fiscal and monetary policy stance is the same (with the July meeting). As these have remained unchanged for years despite significant changes in actual policy stances, we think the lack of change ought not be taken as a signal that policy stance will not change,” the research note said.
“However, should the tone change at some point, we think it could prove relevant and might well indicate a fundamental shift in policy stance,” it added.