There we have it. The NPC Chairman meeting finally took place today and why this is noteworthy is that this meeting is a typically required precursor before the NPC standing committee meeting can convene.
I’ll get to the why this NPC standing committee meeting matters shortly. Before doing so though, there is the issue of “timing” that must be discussed.
It might very well be nothing, but these meetings almost always occur during the second half of October. What we learned today is that the NPC standing committee meeting is now set to take place between Nov 4th and 8th. I’m not one to believe in coincidences so the timing is clearly meant to align with the American election. Whether this will impact the NPC decision making process isn’t known, but it is rather obvious that Beijing wants the benefit of weighing the outcome(s) of Harris v. Trump.
Now, what about the NPC standing committee meeting itself.
There are heady expectations as there’s been a great deal of commentary in both traditional and social media in terms of what, and to what degree/size, there would be additional fiscal stimulus. What we now know is that the publicly released agenda for that meeting makes zero mention of any such discussion.
Fret not. This doesn’t signify that there’ll be no discussion over fiscal support.
If you were to look to last year, it was the very same set up. When the agenda was announced, there was also no specific line item for a fiscal support discussion. And yet, when the meeting concluded it was announced that an additional Rmb1.0trillion of new government bonds would be issued.
I would very much expect the same outcome this time around. Do be careful though. Any such announcement isn’t likely to conform anywhere close to what the global China punditry has been pressing.
The outlook should be for an announced Rmb5-7trillion in new bond issuance. Critical though is where the proceeds will be allocated. Around Rmb1.0trillion is almost certain to be announced with the purpose of being deployed to recapitalize the large State-Owned banks. Another Rmb5.0trillion, however, will likely be earmarked for the specific purpose of local debt restructuring. See this for what it is. A debt swap and not fiscal stimulus.
For local investors, it has already sunk in that Beijing isn’t about to reverse course on its priority of deleveraging the system. No one in China any longer expects Beijing to unleash a material fiscal support package. I can’t say the same for global investors. Their collective and unrelenting obsession over China stimulus seems to know no end. This group should prepare accordingly.
I’ll just head into the weekend knowing that my thesis of Keynes still remaining Dead in China holds firm.
