FAST FIVE: China Shifts To An Easing Mode While "Ex-China" Is On A Tightening Path
China Shifts To An Easing Mode While “Ex-China” Is On A Tightening Path One week after we reported that Beijing had capitulating, urging “Local Govts To Unleash Debt Flood As Cities Begin Backstopping Property Developers” this was confirmed overnight when Goldman reported that the latest Politburo meeting and RRR cut indicated that indeed China's policymakers have focused on stabilizing growth by shifting to an easing mode.
Finally, while the recent dovish signals have reduced left-tail risk to next year's GDP growth, continued property market turmoils including the technical default of Evergrande remain the key to watch in the coming months.
“Anti-monopoly” (反垄断) and “preventing disorderly expansion of capital” (防止资本无序扩张), which made appearance in last year's December Politburo meeting, are no longer included this year.
While the broader directions of “housing is for living in, not for speculation” and improving regulatory frameworks are unlikely to change, with the PBOC announcing RRR cut and State Council meeting stating accelerating local government special bond issuance, domestic macro policy has clearly shifted to an easing mode.
Both the July and the December RRR cut are likely related to policymakers' concerns over the Evergrande debt crisis and broader property sector contraction.