Photographer: Brent Lewin/Bloomberg

China Politburo Flags Caution on Property Stimulus, Goldman Says

  • Financial regulators seen as hawkish on risk of asset bubbles
  • ‘The mention of asset bubbles was new,’ Song Yu says in note

China’s top leaders signaled this week that they’re likely to be cautious on further easing measures even if the property market continues to cool. 

That’s the analysis by Goldman Sachs Group Inc. economists of a statement released this week following a Politburo meeting led by President Xi Jinping. The leaders also pledged to curb asset bubbles, according to a report from official Xinhua News Agency.

"The mention of asset bubbles was new for a Politburo statement," Song Yu, the Beijing-based chief China economist at Beijing Gao Hua Securities Co., the mainland joint-venture partner of Goldman Sachs, wrote in a research note Thursday. "The near-term implication of such a view is that the government is likely to be very cautious with property loosening measures in the future even if the property market continues to cool down, and financial regulators might be increasingly hawkish to minimize the risks of asset bubbles."

Top Communist Party leaders traditionally meet at the end of each quarter to review the economic outlook. The pledge to curb asset bubbles underscores their determination to shift from debt- and stimulus-fueled growth to consumption-led expansion while avoiding risks from a borrowing surge that boosted debt to 2.5 times gross domestic product.

More than two dozen elite party officials met Tuesday to discuss the outlook for the second half after data released earlier this month showed growth in the first six months held steady at 6.7 percent in both quarters. Authorities target maintaining at least 6.5 percent growth through 2020. Economists surveyed by Bloomberg project the expansion will slow to 6.5 percent this year and 6.3 percent in 2017 and 2018.

In the second half, China will continue proactive fiscal policy and keep credit growth reasonable and the yuan “basically stable”, according to the post-meeting statement.

— With assistance by Yinan Zhao

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