China

The Chinese Communist Party's (CPC) third plenary session in July 2024 is an opportunity to enact major structural reforms. The CPC should prioritise reforms to untie household consumption from housing, add a redistributive role to state fiscal functions and ensure the land-based model of finance for urban development yields to a central transfers and local taxes-backed one. The CPC must shrink the housing sector’s footprint on growth and consumption, shift from indirect to direct taxes and plug the structural revenue deficits that have pushed local governments to raise cash from opaque, off-budget mechanisms. The third plenary session of the Chinese Communist Party’s (CPC) 20th Central Committee in July 2024 comes at a critical juncture for an economy beset by profound challenges. ...

What we think This July there are two important meetings in China that may provide further insight into the macro outlook: the Third Plenum and the Politburo meeting. The two policy areas we’ll closely watch are domestic demand and fiscal reform. The economy appears to be at an inflection point. The resilience of the manufacturing sector is a bright spot, while other parts of the economy look mixed, but could start to improve. Investment implications We retain a relatively cautious view on offshore China markets. The downside is limited, but the upside is capped by a mixed macro backdrop and earnings that have yet to show meaningful upside. We expect the A-share market to be relatively more resilient thanks to lower exposure to geopolitical risks (and foreign outflows), limited F...

Welcome to the June 2024 edition of our China and Global Development round-up. This month, I have curated a selection of resources that delve into the Belt and Road Initiative’s role in promoting structural transformation, the evolving dynamics of Africa-Asia relations, the EU and China’s distinct development approaches in Africa, and the New Development Bank. Read 1: The Belt and Road and dynamics of structural transformation Along with my colleagues Lorena Lombardozzi and Rhys Jenkins, I have edited a special issue on “China’s Belt and Road Initiative and dynamics of structural transformation”. This project stemmed from our observation that while there is a lot of discussion about the Belt and Road Initiative (BRI) and international development, they rarely engag...

Key takeaways During its June meeting, the Federal Reserve (Fed) unanimously voted to hold policy rates steady for the seventh consecutive time, leaving the Fed Funds Target Rate unchanged at 5.25% to 5.50%. The much-anticipated Summary of Economic Projections (SEP) broadly met expectations with a higher inflation forecast for 2024 and less easing this year; The median FOMC member called for one 25 basis point cut by the end of this year and four 25 basis point cuts in 2025. Within the Fed’s economic projections, the most significant update was the expectation that core inflation will move to 2.8% for year-end from 2.6%. This increase is likely due to strong first quarter inflation. Chair Powell underscored that the Fed’s decision on the direction of rates continues to b...