Back in July, when the Politburo met to discuss economic policy, officials signaled little more than incremental policy tweaks were on the horizon.
But fast forward to early October, and Beijing has rolled out a slate of support measures, including a fresh debt quota for local governments, more policy bank lending, and new interest subsidies for mortgages.
Dinny McMahon calls it a clear pivot – Beijing is now more concerned about the economy than it was a couple of months ago.
That said, the recent moves largely amount to a familiar Q4 policy top-up.
Meanwhile, deleveraging – Dinny argues – is still on.
On this episode, Trivium China Podcast host Andrew Polk sits down with Dinny (Trivium’s Head of Markets Research) to unpack:
Why the most important measure in the latest suite of moves was letting local governments tap part of their stockpile of unused debt quotas – and why an RMB 550 billion release is still consistent with deleveraging
How policy bank lending is being revived to fund Beijing’s investment in the “six networks,” and why local governments are struggling to find infrastructure projects that clear Beijing’s own bar for financing
Why Beijing is subsidizing loan interest payments instead of cutting interest rates directly – and Dinny’s argument that the subsidies are partially a disguised method of recapitalizing the banks
Why this support package won’t fix weak demand, but how it could still help by boosting infrastructure investment and helping overdue payments to firms land just before the critical Chinese New Year holiday period
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