Central Economic Working Conference Brief

Editor’s note: The Communist Party’s most important economic conference has just concluded. The government must carry out the policies ordained by the party, so what was decided in the past 3 days will be borne out over the coming months. AZ China’s senior analyst Richard Lu looks at the outcomes from the conference.

The three-day Central Economic Working Conference was concluded in Beijing yesterday. China’s leaders and senior officials attended the crucial meeting which set the tone for economic policies in 2015.

“New Normal” was the key word in that conference, to describe the balance between slower growth and higher quality growth for the economy. Given that conference aimed to look at the big picture, there was not many detailed and quantified targets set during the last three days. However, lowering the annual GDP growth rate is now a sure thing and is expected to be 7%. Additionally, there are two things caught my eye.

Five major tasks were listed in the conference. Striving for stable economic growth and exploring new growth were ranked No.1 and No.2 respectively. My reading is that the government has no choice but to prevent a hard landing given the strong risks that exist, including local government debt, and so far there is no effective approach to sustain the high growth but to explore new opportunities. Under that circumstance, I think 7% target will not be a really hard target to be achieved but a one accompanied with more tests of new policies in 2015.

Another interesting thing is that the property market was missed in the agenda again. Some people may think it was a strong indicator that the government left its hand on that market, but how can it be true given the government owns the land? I do think there is a long way to go to mitigate the conflicts between the government, property developers and home buyers. In other words, property market will remain weak unless there is more government support.

At last, I would note to our readers that 2015 is the last year for the 12^th Five Year Plan, so there must be more emphasis placed by the government to complete the tasks outlined in the present plan. Consequently, a more volatile market is likely to be seen in 2015.