To The Moon

China Will Adopt a "Moderately Accommodative" Monetary Policy in the Next Year, The First Shift to Easing Since 2011

The Political Bureau of the CPC Central Committee, which mysteriously did not issue a meeting statement in November, issued a post-meeting report for the December meeting on Monday (9th). The opening remarks of the meeting continued to affirm the achievements of the Chinese government throughout the year. Notably, the outlook for the economy in the upcoming year exceeded market expectations, with policy statements being more positive than they have been in the past decade.

In the late trading session, Hong Kong stocks saw a significant surge, with $HSI(HSI)$   closing up 2.76% on increased volume. Pre-market, Chinese concept stocks collectively soared, demonstrating a swift market response. The three signals highlighted in this meeting were the main catalysts for the market rally.

Signal 1: Introduction of "Unconventional" in Counter-Cyclical Adjustments

The meeting introduced the term "unconventional" in the context of counter-cyclical adjustments, marking a significant departure from the traditional phrasing of "strengthening counter-cyclical adjustments." This new characterization is particularly uplifting, suggesting that once the underlying economic weaknesses and external shocks become more pronounced, the force of counter-cyclical adjustments will move away from the conservative and restrained policy logic of the past. The emphasis on easing policies will shift towards fundamentally reversing market expectations.

Signal 2: More Proactive Fiscal Policies

The meeting proposed implementing more proactive fiscal policies, which is a higher and more assertive stance compared to the "moderately strengthened proactive fiscal policy" articulated in the 2023 Political Bureau meeting. This indicates that, building upon the introduction of "incremental fiscal policies," there remains considerable room for expectation regarding the strength of fiscal policy in 2025, particularly concerning the scale of deficits and deficit ratios.

Signal 3: Reintroduction of "Moderately Accommodative" Monetary Policy After 14 Years

The monetary policy statement was the most direct. After the 2008 financial tsunami, the Political Bureau of the CPC Central Committee announced that it would promote a "moderately loose" monetary policy, which was changed to "stable" in 2010. Now, after 14 years, it has once again changed to a moderately loose monetary policy.

Additionally, the demand-side policy statements emphasized the need to "vigorously boost consumption, enhance investment efficiency, and comprehensively expand domestic demand." The meeting also introduced new expressions aimed at stabilizing the real estate and stock markets, which were not highlighted in previous discussions. Furthermore, the internal demand policies that the market is concerned about were addressed during this meeting.

These signals collectively indicate a shift towards a more proactive approach in both fiscal and monetary policies, which is likely to influence market sentiment and expectations moving forward.

From a Trading Perspective, Investors May Consider the Following Points:

-In the near term, trading activity in Hong Kong stocks and Chinese concept stocks is expected to continue to rise, as the market anticipates more aggressive policy statements ahead of the Central Economic Work Conference scheduled for December 11.

-In the medium term, market conditions may experience fluctuations as investors speculate on policy adjustments, particularly leading up to the National People's Congress and the Chinese People's Political Consultative Conference, typically held in March each year. These meetings will establish the economic targets for the year, including key indicators such as China's GDP and deficit ratio, which are focal points for market attention.

-In the long term, China faces a complex external economic environment, with tariffs posing a marginal drag on the economy, representing the largest macroeconomic risk that could influence the overall trend of Chinese assets. This will likely impact the performance of Chinese assets in the broader market context.

Time to look out for $Alibaba(BABA)$  , $JD.com(JD)$  , $NetEase(NTES)$  $TripAdvisor(TRIP)$  , $Baidu (BIDU.US)$, $Li Auto (LI.US)$, $KE Holdings (BEKE.US)$,  $Tencent Music (TME.US)$,  $Yum! Brands (YUM.US)$,  $ZTO Express (ZTO.US)$ 

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