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.