China’s Financial Market: Short-Term and Mid-to-Long-Term Policy Focus

Aug. 20 2024 (InvestinChina.asia) — A report by Hua Chuang Securities outlines the current policy focus in China’s financial market, with a short-term emphasis on stabilizing growth measures and a mid-to-long-term focus on the effectiveness of policies and their impact on the fundamentals.

Short-Term Policy Focus: Ongoing Implementation of Growth-Stabilizing Policies

The July 30 Politburo meeting emphasized the need for macroeconomic policies to remain robust and effective. The meeting called for the swift implementation of already determined policies and the preparation of additional measures when necessary. Against the backdrop of countercyclical adjustments, growth-stabilizing policies are expected to continue over the next six months.

The meeting also highlighted the importance of accelerating the issuance and use of special-purpose bonds. As of August 16, only 52.7% of the targeted special-purpose bond issuance for the year, based on a quota of 3.9 trillion yuan, has been completed. If the current issuance pace continues, approximately 59.4% of the target will be achieved by the end of August, which is a noticeable acceleration from January to July. The second half of the year is expected to see a significant increase in issuance.

Regarding the mention of additional policy measures, the focus should be on the use of a 300 billion yuan ultra-long-term special bond aimed at supporting large-scale equipment upgrades and consumer product trade-ins. Sectors to watch include automobiles, home appliances, machinery, and ships.

Looking ahead to the second half of the year, the National People’s Congress Standing Committee’s deliberations on the issuance of special bonds will be closely monitored. If similar to last year’s fourth quarter, when an additional 1 trillion yuan in treasury bonds were issued, this could further bolster the policy support for the economy.

Mid-to-Long-Term Policy Focus: Post-Third Plenary Session Policy Tracking

Following the Third Plenary Session, the focus has shifted from the top-down design and sectoral deployment of long-term industrial policies to the implementation and execution at both the central and local government levels. This ensures the continuity and stability of policy measures over the medium to long term.