Economics | 6 December 2021 Analyst certifications and other disclosures on last page. This research report has been created by CCB International Securities Ltd. 1 政治局会议释放稳经济增长的政策基调：明年政策基调向“稳增长”转变符合我们的预期。会议强调保持宏观稳定，以及更有效的财政政策和稳定的货币政策。房地产方面，政策表示支持合理的住房需求，预计近期地产行业的边际宽松将会继续。 人民银行今天宣布对金融机构的存款准备金率下调50个基点。此举预计将释放约1.2万亿的长期资金，部分可用于满足12月中旬到期的中期借贷便利（MLF）的流动性需求。央行表示，此次降准属于货币政策常规操作，不应被理解为当前稳健的货币政策取向有所改变。 未来仍有可能进一步降准。未来流动性走势取决于其他宏观政策（特别是财政政策）以及房地产市场的发展。我们预计短期内流动性政策立场将会保持宽松，明年一季度可能再次降准。下调今明两年长期国债收益率的预测。价格压力是制约持续性的流动性宽松或降准的主要因素。 Politburo meeting signals a more supportive policy stance for next year. The “pro-growth” shift in the policy tone is in line with our expectation. Macro stabilization was emphasized supported by more effective fiscal policy and stable monetary policy. Policies will be aimed at supporting reasonable housing demand, a sign that recent easing on the liquidity front will continue. PBoC delivers a 50bp RRR cut to financial institutions today. The action is expected to release about RMB1.2t in long-term liquidity, which can be used to meet the liquidity needs of large maturing MLF in mid-Dec. The PBoC maintains that this is part of regular policy operations and should not be construed as a change to the existing orientation towards prudent monetary policy. Further RRR cuts likely. The scope of further liquidity easing depends on other macro policies (in particular fiscal) and developments within the housing market. We expect the policy stance to stay accommodative in the near-term, and consider another RRR cut to be likely in 1Q22F. Price pressure will remain the key constraint on sustained liquidity easing or interest rate cuts, however. Reflecting the dovish stance of current policies, we lower our end-year 10-year Treasury yield forecast. Li Cui (852) 3911 8274 cuili@ccbintl.com Lulu Jiang (852) 3911 8012 jianglulu@ccbintl.com Ying Zhang (852) 3911 8241 zhangying@ccbintl.com CCBI SECURITIES | RESEARCH China Economics Update: Politburo signals pro-growth policy shift; PBoC delivers an RRR cut 政治局会议释放稳增长政策基调，央行下调存款准备金率 Economics | 6 December 2021 CCBI SECURITIES 2 Politburo indicates policy support next year Today’s China Politburo meeting sets the tone for economic policies into next year. The top leadership pledged that economic operations will be kept within a reasonable range. The basic macro policy formulation, including proactive fiscal policy and stable monetary policy, is similar to recent policy statements. A few notable policy adjustments signaled a pro-growth tilt, including:  Promoting the construction of affordable housing, support for the commercial housing market to better meet the reasonable needs of homebuyers, and promoting the healthy development of the real estate industry.  Ensuring energy supply, especially for households during the winter, and focusing on preparing for the Beijing Winter Olympics.  Fiscal policies will to be more targeted and effective. The policy adjustments within the energy sector, housing, and fiscal policies were all in line with our expectations for next year (CCBIS – Big Picture 2022 Macro Outlook, 1 Dec 2022). Support for housing demand points to likely further easing of property purchases. The Central Economic Work Conference to be held later this month is expected to flesh out economic policy plans for the coming year. PBoC delivers a universal RRR cut Separately, following Premier Li’s indication of an RRR cut “in a timely fashion” last Friday, the PBoC announced today (6 Dec) that it would cut the RRR for all banks by 50bp, effective on 15 Dec. After the cut, the weighted average RRR for Chinese FIs would fall to 8.4%, with the only exceptions being the county-level banks that already have a relatively low RRR of 5%. The move is expected to release about RMB1.2t in long-term liquidity according to the central bank. According to the PBoC, part of the liquidity released is to help FIs repay maturing MLF loans while also providing long-term funds for FIs to satisfy market requirements. Maturing MLF will be large in Dec at about RMB950b. The central bank stressed that the RRR cut is a routine operation of monetary policy, and that prudent monetary policy is still the order of the day. Dovish stance signals policy support. Further RRR cuts likely The previous RRR cut of 0.5ppt was conducted by the PBoC on 15 Jul (Fig 1). In recent years, RRR cuts have been increasingly relied upon as a structural tool to promote lending to specific sectors. Since 2019, three rounds of targeted RRR cuts have been granted to financial institutions that met certain criteria for SME lending; moreover, liquidity injections from targeted easing have been relatively modest. By comparison, the RRR cut last Jul suggested more aggressive liquidity easing. However, over the past few months, the PBoC has defied market expectations of additional RRR cuts driv