(Yicai Global) Dec. 9 -- China will continue its efforts to maintain stable growth and adopt a loose monetary policy, while supporting new infrastructure and seeking a soft landing for the real estate sector, the Central Political Bureau of the Communist Party of China stated at its fourth-quarter meeting.

The meeting to plan economic work for new year was held on Dec. 6, with an announcement afterwards that “prudent monetary policy must be flexible and moderate and keep reasonable and sufficient liquidity.”

The nation is likely to issue special bonds ahead of schedule from late this year to next year to maintain stable growth, and social financing in the fourth quarter of this year and the first quarter of next year is expected to pick up, per the meeting.

The continuous efforts to maintain stable growth will include a structurally loose monetary policy to support low-carbon progress, new energy, the digital economy and new infrastructure, as well as the issuance of more special bonds to help investment in infrastructure rebound. 

The cut in the reserve requirement ratio announced on Dec. 6 was one indicator of the loosening of monetary policy. 

The purchasing managers’ sub-indexes for new orders, housing sales, business activity by small and medium-size companies and social financing and credit have been sliding since May amid a growing economic downturn. Commodity prices have also been fluctuating at high levels since August and the economic cycle has been hit by recession and stagflation pressures.

The plan for next year stated at the meeting is to focus on stabilizing the economy and keep it running in a reasonable range.

One serious issue for China's economy next year is that while new driving forces such as new energy and the digital economy will continue to grow, it may not be enough to make up for the decline in the traditional economy.

Moves by the US Federal Reserve to tighten monetary policy will affect China in terms of the exchange rate, capital flows and other respects, but China’s economic fundamentals are still resilient, the spread on China-US 10-year government debt is wide, and risks are generally under control.

(The author is chief economist with Soochow Securities)

Editor: Tom Litting