What to Watch for as Xi Convenes China's Annual Economic Meeting

(Bloomberg) -- Stepped up risk prevention will likely top the agenda next week when Chinese President Xi Jinping convenes his top deputies to decide economic targets and policy priorities for 2018.

Ensuring financial stability emerged as a key priority from the last meeting a year ago, when leaders at the annual Central Economic Work Conference pledged to prevent and control threats while pursuing prudent and neutral monetary policy and proactive fiscal policy.

In the lead-up to next week’s meeting, Xi and other Politburo leaders said next year they’ll "effectively" control leverage and prevent major risks while giving more support to the real economy and promoting higher-quality development, according to a statement Friday.

The economic conference will be held Monday to Wednesday, the online news portal Ifeng.com reported Tuesday, citing an unidentified person close to the matter. Authorities historically haven’t announced the timing of the conference until after the conclusion, when state media typically release a statement about the proceedings.

The upcoming event will be especially closely watched as 2018 marks the first year of Xi’s second five-year term and follows his consolidation of power at a twice-a-decade Communist Party Congress in October. It also will be the first since Xi’s top economic adviser, Liu He, was elevated to the Politburo during the congress, and may be the last for People’s Bank of China Governor Zhou Xiaochuan, who has hinted he’ll soon retire.

Here’s what to watch:

Who Goes?

Xi leads the meetings. Others present typically include members of the 25-member Politburo, central bank policy makers, financial regulators, government ministers, state-owned enterprise chiefs, provincial governors, plus some of the more elite military officers and legal officials from the supreme court and procurator-general.

Why Care?

The confab will lay out how Xi wants to steer the world’s second-largest economy next year.

Policy makers usually convene the economic work conference in December, but the annual economic growth target usually isn’t announced until the People’s Congress in March. The 2017 target was "growth of around 6.5 percent, or higher if possible in practice."

There’s also a longer-term growth target, but leaders didn’t mention it at the October party congress as they stressed that they want higher quality economic expansion over just speed.

Wang Tao, head of China economic research at UBS Group AG in Hong Kong, wrote in a recent note that leaders are likely to set a slightly lower growth target for 2018, suggesting a gradual deleveraging and no "serious" property tightening measures are in the pipeline.

Yao Wei, chief China economist at Societe Generale SA in Paris, said in a recent Bloomberg Television interview that Xi would probably accept slower economic expansion as he also seeks to reduce persistent pollution and trim excess industrial capacity.

Other Policies

New language on monetary and fiscal policy will be closely watched for even minor shifts. Since the last economic meeting announced prudent and neutral monetary policy would be the goal, central bank officials have repeated those pledges often and never deviated. Nuanced wording could signal a tightening or leave room for easing if the economy slows.

Last week’s Politburo meeting, widely viewed as a prelude to the economic conference, also highlighted reducing risk as the top priority. Next week’s meeting will likely follow up on that and signal how the sweeping deleveraging campaign is expected to continue next year. 

Meanwhile, drives to curb pollution and overcapacity also will likely be high on the agenda, and remedies for the country’s property bubbles could be underlined. Leaders have also called for accelerated housing reforms, which could be further defined at this meeting.

Finally, watch for a repeat of the unusually straightforward order issued in the post-meeting statement after last year’s meeting: "Houses are built to be inhabited, not for speculation." The blunt order was repeated again in October at the Party Congress, where Xi himself used a nearly identical phrase in his keynote address.

©2017 Bloomberg L.P.

With assistance from Miao Han, Yinan Zhao

Bloomberg
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