China’s new leadership will be reactive to the ongoing economic slowdown and emerging financial stress, not proactive in setting a new economic policy agenda. In the short term, cyclical data should improve modestly, while the property sector and slowing exports will weigh heavily on the 2023 outlook. A policy vacuum awaits before new economic leadership are appointed through March, but interest rates should continue declining, while the PBOC will intensify its efforts to maintain currency stability over the next few months.
