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Macroscope | No U-turn on China’s regulatory crackdown in 2022, but policy easing should lift investor spirits
- China’s stock market is rebounding as officials attempt to reassure investors. Beijing’s focus is on ensuring stable growth, but policymakers remain committed to long-term goals such as ‘common prosperity’
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After a weak performance in November, Chinese equities have rebounded strongly in December, pushing the CSI 300 index to its highest level since August. Positive developments on the policy front have given a major boost to investor sentiment recently.
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There had been concerns that Chinese policymakers were placing less importance on maintaining high growth levels and creating jobs. As well as normalising monetary and fiscal policies, policymakers have initiated regulatory tightening measures on the property, technology and high-emission sectors this year.
This suggests a change in China’s macro policy framework; Beijing now seems more tolerant of a near-term slowdown in growth to achieve its long-term strategic objectives such as “common prosperity”.
Some investors were worried that the “policy put” – the idea that policymakers would roll out supportive policies to prevent any huge downside and put an effective floor on economic growth – may have been weakened.
However, both the recent Politburo meeting and the Central Economic Work Conference have highlighted growth stability as the top priority for 2022. Policymakers seem more concerned about downward pressures on growth, identifying three challenges: demand contraction, supply shocks and weakening expectations.
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These meetings signal that a “policy put” remains in place even though officials may be more willing to tolerate short-term growth pain than before.
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