中国：第四次全会后的扶持政策

Economics - Asia ex-Japan Research Analysts China: Supportive measures after the 4th Plenum Asia Economics Ting Lu - NIHKting.lu@nomura.com+852 2252 1306 Despite the 4.8% growth in Q3, Beijing will have to face that reality growth headwindshave been building up and will almost surely strengthen in Q4. The government hasalready made some efforts on the fiscal front to support demand over the past couple ofmonths. However, these efforts have not been enough due to seemingly resilient growthso far, the priority placed on drafting the 15th Five-year plan, and the stock market boom.We reckon that, after the 4th Plenum this week, policy focus might be once again shiftedto ensuring short-term growth stability and ending deflation. Fiscal expansion will likely bestepped up, policy rates could be moderately cut, and arrears might be further cleared. Jing Wang - NIHKjing.wang@nomura.com+852 2252 1011 Harrington Zhang - NIHKharrington.zhang@nomura.com+852 2252 2057 Despite the 4.8% growth in Q3, Beijing will have to face reality Hannah Liu - NIHKhannah.liu@nomura.com+852 2252 1082 The seemingly resilient 4.8% y-o-y growth in Q3 hides several underlying seriouschallenges for Beijing. First, deflation is persistent, resulting in nominal GDP growth atonly 3.7% y-o-y in Q3. Second, the growth drivers in Q3 were stock trading and exports,which may not be sustainable, as China’s stock markets tend to be quite cyclical andescalating trade tensions will eventually bite. Third, retail sales growth fell to 3.0% y-o-y inSeptember and is set to drop further, in our view, due to the payback effect of the trade-inprogram and a higher comparison base. Fourth, fixed-asset investment (FAI) growthworsened to -6.8% y-o-y in September on account of the lasting property slump,deteriorating local government finance, the excessive overinvestment in some sectors,and Beijing’s anti-involution campaign. Last but not the least, the property sector hasshown no sign of stabilization at all, with growth of new home sales sliding to -9.8% byvolume and -13.1% by value in Q3 from -3.9% and -8.2% in Q2. Beijing has already made efforts to support demand, but that’s not enough In the past month,Beijing instructed its policy banks to provide RMB500bnas seedcapital to boost investment and increased local governments’ bond financing quota for2025 by RMB500bn. It has also been whispered that Beijing might assign anotherRMB1.0trn for local governments to clear arrears to non-financial business entities suchas constructors. Earlier in July, Beijing announced a program for a childbirth subsidy andpre-school tuition fee exemptions. Then in August Beijing unveiled two interest subsidyprograms to be funded through the existing fiscal budget starting from September. After the 4th Plenum, policy focus will be shifted to short-term growth stability The 4th Plenum this week is mainly for discussingthe next five-year plan. After theplenum, we expect Beijing to re-focus on short-term growth stability. In our view, Beijing’sbest strategy is to resist the temptation to fuel the stock markets by avoiding too-high-profile monetary measures in the near term, remaining vigilant by avoiding contractionarypolicies, cleaning up the property mess, and addressing some deep-rooted problems suchasthe unequal social security system. When stock market enthusiasm cools down further,Beijing may step up its stimulus measures to arrest the growth slowdown. In earlySeptember we emphasized our view thatthe PBoC would be reluctant to follow the Fed incutting rates in Septemberdespite the ongoing deflation. However, towards year-end, wethink it’s highly likely the PBoC will deliver a 10bp rate cut. Supportive measures introduced since mid-year Over the past month,Beijing instructed its policy banks to provide RMB500bnas seedcapital to boost investment, and increased local governments’ bond financing quota for2025 by RMB500bn. It has also been reported that Beijing might assign anotherRMB1.0trn for local governments to clear arrears to non-financial business entities suchas constructors (Source:Bloomberg). Earlier in July, Beijing announced a program for achildbirth subsidy and pre-school tuition fee exemptions. Then in August Beijing unveiledtwo interest subsidy programs for consumer and service-related business loans to befunded through the existing fiscal budget starting from September. Policy banks have deployed nearly 60% of RMB500bn in new financial tools On 29 September, the NDRCannouncedRMB500bn in new financial tools for policybanks, which was initially proposed at the April Politburo meeting. According to a Caixinreport on 22 September, the funding quota is divided among three policy banks, includingthe China Development Bank (RMB250bn), the Agricultural Development Bank(RMB150bn) and the Export-Import Bank (RMB100bn). As of 17 October, ChinaDevelopment Bank and Agricultural Development Bank have deployed a total of nearlyRMB300bn, which is expected to drive inves