Key takeaways include:
Balanced assessment of the economic situation. The leaders acknowledged an improved economic outlook in light of stronger-than-expected 1Q data. On the other hand, they remain cautious on domestic demand and a sustainable recovery. This is in line with our view that the post-reopening economic recovery is uneven and still in its early stages.
Pro-growth policy tone intact. The meeting emphasized supporting and expanding demand is crucial for a sustained recovery. Fiscal policy was reiterated to be proactive and monetary policy to be precise and forceful, the same as what was said at the NPC. There was a hint to supportive policies to boost consumption demand, support employment and restore private sector confidence. This confirms that macro policies will remain supportive, defying some market concerns on a tilt to policy tightening.
Renewed focus on tech and EV. Leaders called for efforts to enhance tech self-reliance and promote artificial intelligence. They also pledged to accelerate the development of EVs and the building of related infrastructure, including charging piles and an expansion of the power grid. Greater government support is likely to be granted for high value-added initiatives. Detailed policy measures could be unveiled by various ministries.
Continued opening up. Attracting foreign investment was reiterated as a key task. The meeting also vowed to introduce more pilots of free trade zones and ports. This is in line with Beijing’s recent moves to enhance trade and economic ties overseas, in part countering efforts by the Biden administration to isolate China on the global stage.
Implications. In our view, the overall tone of the statement is relatively balanced. On the positive side, earlier market concerns on policy tightening appear to be overdone. The market may re-focus on fundamentals and geopolitical developments in the coming weeks. Next to watch include tourism-related data for the Labor Day holiday (29 Apr–3 May) and Biden’s executive order on China’s tech investments which is expected around the G7 Summit (19-21 May).
Main contributors - Yifan Hu, Kathy Li
Content is a product of the Chief Investment Office (CIO).
Original report - China's 1Q Politburo meeting maintains a pro-growth tone, 28 April 2023.