China Weekly: Low expectations for the Politburo meeting
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UBS observes that China's current macro environment resembles a Goldilocks scenario. GDP growth remains robust, exports are steady, domestic demand indicators are improving, deflationary pressures are easing, and the equity market is performing well. Simultaneously, the currency is strong, property markets show recovery signs, and diplomatic relations with most major partners are stabilizing. Consequently, UBS maintains low expectations for any major stimulus from the upcoming Politburo meeting later this month.
While interbank liquidity is ample and funding rates remain low, broad money and credit growth continue to lag. The central bank has encouraged markets to focus less on aggregate quantity metrics. Several cities have relaxed withdrawal restrictions on the Housing Provident Fund, which totals RMB 10.9 trillion. However, UBS remains skeptical about the sustainability of this policy-driven property recovery.
RMB internationalization is accelerating. The PBOC and SAFE recently issued joint regulations on overseas corporate lending, effectively allowing more capital outflows to moderate the pace of currency appreciation.
Finally, UBS cautions investors to remain vigilant regarding data anomalies. Recent official emphasis on proper performance metrics comes amid past discrepancies, such as inflated Nanjing export figures. The reliability of Chinese trade data has declined, showing significant gaps when compared against partner data.