Fra Reuters
China’s leaders signaled they will take further steps to support growth, including widening the fiscal deficit and stimulating the housing market, to put a floor under the economy’s slowdown.
Monetary policy must be more “flexible” and fiscal policy more “forceful” as leaders create “appropriate monetary conditions for structural reforms,” according to statements released at the end of the government’s Central Economic Work Conference by the official Xinhua News Agency on Monday. It said the fiscal deficit ratio should be raised gradually.
While the leadership also endorsed structural reforms and reining in China’s increasing reliance on credit, the macroeconomic policy statements indicated concern about letting the economy’s expansion slow too much.
“Although the overall cyclical policy stance is set to be ’steady’, the tone on fiscal, monetary and other policies was modestly dovish,” economists at Goldman Sachs Group Inc. led by Song Yu wrote in a note. “The more positive cyclical policy tone from this conference makes us somewhat more comfortable with our forecast of only a moderate growth deceleration in 2016.”
The government’s annual growth target is typically set at the gathering, though not announced. President Xi Jinping has previously suggested the nation must meet a minimum annual average growth pace of 6.5 percent through 2020.
‘Concerted Easing’
“They have a challenge to restore their own credibility, and to that end we’ll see concerted easing efforts in order to try to turn the economy around, at least in the short term,” said Mark Williams, the chief Asia economist at Capital Economics Ltd. in London. “It’s clear that policy in a broad sense is still being eased, and it’s reasonable to expect looser fiscal policy next year and also looser monetary policy.”
