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Fiscal Policy Takes Center Stage in 2019

China’s leadership will hold a critical meeting in December, the Central Economic Work Conference, to establish economic policy priorities for next year. Our expectations for the meeting include:

Fiscal policy will be more supportive next year. Monetary policy played a larger role in 2018, but a larger fiscal deficit and quasi-fiscal spending will be used to stabilize growth in 2019. Policy transmission is still hampered by the local government debt burden.

Policy toward the property sector will be more constructive, but headwinds persist. The property sector will continue to drag on growth as developers’ financing is under pressure and construction slows.

Trade tension to keep monetary easing intact. External pressure on China’s economy will grow in 2019 compared to this year, even if the outcome of the US-China bilateral meeting at the G20 is modestly constructive. Monetary easing will continue as Beijing attempts to boost lending to private firms.

Posted December 5, 2018
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