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China’s top policy makers confirmed that more monetary and fiscal support will be rolled out in 2019, as the world’s second-largest economy grapples with a slowdown that’s yet to show signs of ending.
"Significant" cuts to taxes and fees will be enacted in 2019 and while monetary policy will remain "prudent," officials will strike an "appropriate" balance between tightening and loosening, according to a statement published after the annual Economic Work Conference that concluded in Beijing on Friday.
The statement signals that China is ratcheting up the limited, targeted stimulus approach used during 2018, though still stopping short of the all-out support that would pressure the currency and hobble efforts to contain debt. Yet as economic data has continued to disappoint despite months of policy tweaks, the conference outcomes suggest the matter is becoming more urgent.
"Policy makers see the Chinese economy facing bigger downward pressures and an increasingly challenging external environment," said Wang Tao, head of China economic research at UBS in Hong Kong. "As a response, the work conference sent more and more specific easing signals, and said they want to push harder on reforms and supporting the private sector."
Earlier, the MSCI Asia Pacific Index headed for its fourth drop in six sessions as benchmarks slipped in Japan, China and Australia, though shares in Hong Kong rose.
The economy slowed again in November as retail sales and industrial production weakened. Economists expect central bank support to involve another 200 basis points of reductions to the required reserve ratio for major banks, though most don’t currently forecast a cut to the benchmark 1-year lending rate.
In 2017, the Work Conference laid out a three-year approach to winning "critical battles" against financial risk, pollution and poverty. In the grip of the trade war this year and a sharper-than-expected contraction of unofficial funding channels, the leverage campaign has been softened this year. Economists see growth of the world’s second-largest economy slowing to 6.2% next year from 6.6% in 2018.
This year, amid the ongoing trade confrontation with the US, policy makers committed to implementing the agreement made with the Trump administration in Argentina. Officials will push for the diversification of export markets and reduce the administrative costs on imports, according to the statement.
The government also pledged to protect foreign companies’ legal rights in China, especially on intellectual property, and will allow sole ownership in more sectors - addressing a topic that’s been a source of US concerns.
