Plenum

The room for further monetary easing may be more limited than what the market believes, and it is difficult for interest rates to fall further in China. This is because the economy is likely to set for stabilization or even a mini cyclical rebound after six straight quarters of slowdown, as the outlooks for housing and automobile are quite positive. Also, the economy is not heading for deflation. The decline of PPI year-on-year growth is probably ending while the pork-led CPI inflation is to surge further. Last, the external pressure may also ease slightly if Beijing could strike a truce with Washington.  

The Fourth Plenum of the Chinese Communist Party’s 19th Central Committee convened and concluded at the end of October 2019. This plenum gave more indications that President Xi will continue to serve after 2022. Facing a slowing economy and an unpredictable White House, the Party’s leaders pledged to modernize state governance and to carry forward Socialism with Chinese characteristics as China’s ruling ideology. In short, the Party is going to prove that it can reconcile governance dilemmas that other political systems cannot.