[ANALYSIS] China’s closed-door July Politburo Meeting takes place this week.

Analysis details (06:40)

OVERVIEW: The sluggish Chinese economic rebound since the abandonment of the nation’s zero-COVID policy has been a drag on global growth sentiment. Chinese Q2 GDP growth indicated a loss of momentum, with the Y/Y missing forecasts (6.3% vs exp. 7.3%), whilst the Q/Q printed firmer than expected but less than the prior (0.8% vs exp. 0.5%, prev. 2.2%). A date for the July Politburo meeting has not been telegraphed, and officials do not typically announce specific measures at the meetings. Desks will be eyeing the language and the tone of the statement for hints on upcoming potential support.

SUPPORTING CONSUMPTION: Analysts see this topic as being the key focus of the Politburo meeting. Chinese retail sales in June printed below expectations and underscored the weak economic recovery. The government has recently announced modest measures to boost consumption in various sectors.

PROPERTY MARKET POLICY: Desks believe leaders could signal an additional easing of property controls. Bloomberg sources previously reported that China is mulling easing some home-buying restrictions in the largest cities. Leaders are also likely to repeat that the housing market is not for speculation.

FISCAL POLICY: Analysts see the need for more fiscal support to bolster ailing domestic demand, although desks downplay the chance of the rollout of unconventional tools – such as special sovereign bonds, some suggest some tools such as policy bank financial for infrastructure projects could be announced.

MONETARY POLICY: The meeting will likely hint at more modest easing steps by the PBoC to underpin the economy. State media recently highlight the room for RRR and interest rate cuts, alongside more measures to expand domestic demand in H2. UBS sees a 10bps cut in interest rates and a 25bps to RRR in H2.

REGULATORY CRACKDOWNS: Analysts highlight that private businesses are still recovering from COVID controls and regulatory crackdowns – particularly the tech sector. Desks believe a clear framework is needed to revive confidence that private businesses can expand without fear. Analysts add that Q3 sees a greater urgency for such a framework given the downbeat Q2 economic data.

RECENT FORECAST ALTERATIONS:

• JPMorgan cut China's FY23 GDP growth forecast to 5.0% (prev. 5.5%).


• Citi cut China's FY23 GDP growth forecast to 5.0% (prev. 5.5%).


• Morgan Stanley cut China's FY23 GDP growth forecast to 5.0% (prev. 5.7%).


• SocGen cut China's FY23 GDP growth forecast to 5.0% (prev. 5.5%).


• Barclays cut China's FY23 GDP growth forecast to 4.9% (prev. 5.4%).


• Deutsche Bank cut China's FY23 GDP growth forecast to 5.3% (prev. 6.0%).


• BofA Global Research cut China's 2023 GDP growth forecast to 5.1% (prev. 5.7%).

24 Jul 2023 - 06:40- Fixed IncomeData- Source: Newsquawk