What's after CEWC_ Beijing Provides Rare Forward Guidance

Key Takeaways Industry/Company - Industry: China Economics, Asia Pacific - Company: Not specified, focus on broader economic and policy analysis Core Points and Arguments - Beijing Forward Guidance: Beijing provided forward guidance for the fiscal package to be announced in March NPC, marking the first time in over a decade. This was a positive step, although the package is expected to remain modest with a slightly improved mix. - Consumption Support: Significant increase in special long-term CGBs for consumer goods trade-in program. The program is expected to double in size next year, covering more non-durable goods. - Housing Market: Use of LGSB to support housing inventory digestion and giving local government more autonomy in setting criteria for housing buyback. The size of the housing buyback program could be similar to this year's (~Rmb300bn), but easing the criteria may help accelerate implementation. - Local Government Fiscal Constraints: Efforts to promote central-local fiscal reforms and settling payables to corporates. Beijing is expected to adopt more central government leveraging to support the economy and use local debt swaps to mitigate the risk of a deflationary downward spiral. - Consumption Tax Reform: A pilot program on consumption tax reform (e.g., high-end watches, jewelry) is possible, but broad-based implementation is unlikely given the deflationary economy. Other Important Content - Market Reaction: The market reacted disappointedly to the vague CEWC statement last week, leading to the need for forward guidance. - Fiscal Package: The fiscal package is expected to be modest with a slightly improved mix, focusing on consumption support, housing market, and local government fiscal constraints. - Economic Outlook: The forward guidance indicates a cautious approach to economic policy, with a focus on addressing specific challenges in the economy.