September Politburo Meeting to Analyze and Study Current Economic Situation and Economic Work; Investors Pumped

The Politburo met Thursday for its monthly meeting and the topic was “to analyze and study the current economic situation and make further arrangements for economic work”. That is not the usual topic for the September Politburo meeting. I have included an unofficial translation of the full readout at the end of this post.

The readout did reiterate that they “must grasp key points and take proactive actions, effectively implement existing policies, intensify efforts to introduce incremental policies, further improve the targeting and effectiveness of policy measures, and strive to complete the economic and social development goals and tasks for the entire year.”

The paragraph in the readout that talks about intensifying “counter-cyclical adjustments in fiscal and monetary policies”, lowering the RRR and making “substantial interest rate cuts”, making efforts to stop the decline and stabilize [止跌回稳] the real estate market, and boosting the capital market is remarkable and stimulative, both to investors but also to the idea that something has shifted at the top of the policymaking apparatus and now there is a recognition that the economy is struggling and the economic, social and political risks have intensified to the point that more measures are needed.

Here is the paragraph discussed above, the bolding is from me:

The meeting emphasized the need to intensify counter-cyclical adjustments in fiscal and monetary policies, ensure necessary fiscal expenditures, and effectively carry out the "three guarantees" at the grassroots level. It is necessary to issue and utilize long-term special government bonds and local government special bonds to better leverage the role of government investment. The reserve requirement ratio should be lowered, and substantial interest rate cuts should be implemented. Efforts should be made to stop the decline and stabilize the real estate market, strictly control the increase in new commercial housing, optimize the existing stock, improve quality, and increase the issuance of loans for "whitelist" projects to support the revitalization of idle land. Public concerns should be addressed by adjusting housing purchase restriction policies, lowering interest rates on existing housing loans, and promptly improving policies related to land, fiscal, tax, and finance to promote the establishment of a new model for real estate development. Efforts should be made to boost the capital market, vigorously guide medium- and long-term funds into the market, and resolve obstacles for social security, insurance, and wealth management funds entering the market. Support should be provided for mergers and acquisitions of listed companies, steadily advance public fund reforms, and research and introduce policies to protect small and medium investors.

会议强调，要加大财政货币政策逆周期调节力度，保证必要的财政支出，切实做好基层“三保”工作。要发行使用好超长期特别国债和地方政府专项债，更好发挥政府投资带动作用。要降低存款准备金率，实施有力度的降息。要促进房地产市场止跌回稳，对商品房建设要严控增量、优化存量、提高质量，加大“白名单”项目贷款投放力度，支持盘活存量闲置土地。要回应群众关切，调整住房限购政策，降低存量房贷利率，抓紧完善土地、财税、金融等政策，推动构建房地产发展新模式。要努力提振资本市场，大力引导中长期资金入市，打通社保、保险、理财等资金入市堵点。要支持上市公司并购重组，稳步推进公募基金改革，研究出台保护中小投资者的政策措施。

As I wrote Wednesday when discussing the Tuesday announcements of monetary stimulus and stock market support:

As expected, policymakers announced measures just before the October 1st 75th anniversary of the PRC to pop the stock market. Investors loved the announcements Tuesday, and I think the swap and relending facilities should add enough liquidity into the stock market to drive at least a relief rally, though with the additional promised measures from the CSRC to “release six measures to promote mergers and acquisitions, while also striving to work with all parties to smooth the cycle of "fundraising, investment, management, and exit" for private equity and venture capital funds” there may be a bit of a revival of animal spirits. Policymakers need that revival if they want to strengthen the venture capital ecosystem to better fund technology breakthroughs, as they have said repeatedly since the summer. Investors need to have paths to liquidity. Perhaps some of the swap facility can even be used for IPOs of key tech firms? The rate cuts are also interesting, but far from enough to increase demand and improve consumer confidence. As many economists and analysts have said, there needs to be more fiscal stimulus, and so now people are hoping for that, perhaps as soon as the imminent September Politburo meeting. If the Tuesday announcements are a sign of recognition now at the top the economy is struggling more than they would like and that the 5% GDP growth target is at risk then perhaps there will be more relief soon.

Policymakers have succeeded in reviving the stock market into the October 1 Holiday, and this time a rally may have a bit more legs - China Stocks Head for Best Week in a Decade on Politburo Vows.

Unofficial full translation of the readout:

CPC Central Committee Political Bureau Holds Meeting to Analyze and Study Current Economic Situation and Economic Work, CPC General Secretary Xi Jinping Presides Over the Meeting 中共中央政治局召开会议 分析研究当前经济形势和经济工作 中共中央总书记习近平主持会议

The Political Bureau of the Communist Party of China (CPC) Central Committee held a meeting on September 26 to analyze and study the current economic situation and arrange economic work for the next stage. Xi Jinping, General Secretary of the CPC Central Committee, presided over the meeting.

中共中央政治局9月26日召开会议，分析研究当前经济形势，部署下一步经济工作。中共中央总书记习近平主持会议。

The meeting believed that since the beginning of this year, the CPC Central Committee with Comrade Xi Jinping at its core has united and led people of all ethnic groups across the country to overcome difficulties and respond calmly. They have intensified macro-control efforts, focused on deepening reform and opening up, expanding domestic demand, and optimizing the economic structure. As a result, the overall economic operation has been stable with progress, new quality productive forces have developed steadily, people's livelihood protection has been solid and strong, positive progress has been made in preventing and defusing risks in key areas, high-quality development has been steadily advanced, and the overall social situation has remained stable.

会议认为，今年以来，以习近平同志为核心的党中央团结带领全国各族人民攻坚克难、沉着应对，加大宏观调控力度，着力深化改革开放、扩大国内需求、优化经济结构，经济运行总体平稳、稳中有进，新质生产力稳步发展，民生保障扎实有力，防范化解重点领域风险取得积极进展，高质量发展扎实推进，社会大局保持稳定。

The meeting pointed out that the fundamentals of China's economy and its favorable conditions, such as a vast market, strong economic resilience, and great potential, have not changed. At the same time, new situations and problems have emerged in the current economic operation. It is necessary to view the current economic situation comprehensively, objectively, and calmly, face difficulties squarely while maintaining confidence, and effectively enhance the sense of responsibility and urgency in doing economic work well. We must grasp key points and take proactive actions, effectively implement existing policies, intensify efforts to introduce incremental policies, further improve the targeting and effectiveness of policy measures, and strive to complete the economic and social development goals and tasks for the entire year.

会议指出，我国经济的基本面及市场广阔、经济韧性强、潜力大等有利条件并未改变。同时，当前经济运行出现一些新的情况和问题。要全面客观冷静看待当前经济形势，正视困难、坚定信心，切实增强做好经济工作的责任感和紧迫感。要抓住重点、主动作为，有效落实存量政策，加力推出增量政策，进一步提高政策措施的针对性、有效性，努力完成全年经济社会发展目标任务。