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The recently concluded Third Plenum of the Chinese Communist Party (CCP) largely maintained the policy status quo, contrary to many economists’ expectations. Innovation, green development, and consumption were confirmed as the long-term strategic direction.
“Looking at the big picture, many of the Third Plenum’s key themes and messages remain consistent with and set the stage for China’s Great Transition,” said Lynn Song, Chief Economist, Greater China, at ING.
“Many economists were expecting news on fiscal reforms, particularly the potential for new consumption or property taxes to offset the loss of land sale revenue for local governments. The initial communique did not go into detail on this front, noting it was necessary to ‘deepen the reform of the fiscal and taxation system’,” Song added.
“We believe that the Third Plenum meeting ended on a slightly optimistic note, despite the overall signal for policy continuity,” opined Nicholas Yeo, head of China equities at abrdn.
As per Yeo, it was unusual that the Third Plenum emphasised some short-term targets, although it usually focuses on mapping out the country’s long-term objectives. “This could be an indication of the authorities’ growing awareness of the need to address the country’s lagging economic growth,” Yeo said.
China’s economic growth slowed to 4.7% in the April-June period year on year. This is noticeably weaker than the 5.3% in the first quarter. The authorities aim to achieve an economic growth target of 5% for the entire year.
China’s Third Plenum calling for the promotion of green development
Meanwhile, the Third Plenum called for promoting green development by reducing carbon emissions and pollution and improving environmental management systems and mechanisms for low-carbon development.
“With China’s goals to hit peak carbon by 2030 and carbon neutrality by 2060, the green economy will likely remain a major long-term area of growth,” said Ewa Manthey, a Commodities Strategist at ING. “We believe that metals that are linked to green energy, like copper and aluminium, will benefit from the transition that China is going through as Beijing moves its focus to the new three growth drivers – EV, batteries, and renewable energy,” she added.
According to the ING analyst, Beijing’s supportive policies for the EV sector have pushed the market share of total vehicle sales to an all-time high of 41.1% in June. Sales in the first half of the year were up 32% year over year, according to the China Association of Automobile Manufacturers.
Abrdn points out that China dominates the clean technology manufacturing industry. “The Chinese government views clean technology manufacturing as a new growth engine, with the potential to offset the property sector slowdown. This is supported by high-level targets to reduce emissions and generous local government subsidies to attract investments,” wrote Alexandre Popa, a Sustainability Analyst, in a recent insight.
