Executive summary
- China is likely to maintain a neutral monetary policy stance. Liquidity management remains the key policy tool and we think peak fiscal tightening is behind us.
- Chinese policymakers are expected to maintain a tight grip on the property sector, despite the recent reserve requirement ratio (RRR) cut; the pace of its deleveraging has been relatively slower than other sectors.
- The macro-policy measures taken should help ensure stable growth and prevent excessive risk build-up for the real estate sector, which are positives for bond investors.
- We expect credit bifurcation and market consolidation among the Chinese property players to persist.
- We believe the Chinese government is likely intervene and keep liquidity ample if there are signs of heightened credit risk or stress in the credit markets.