Theme of the Day: China’s July Politburo meeting focuses on building domestic demand

China’s Politburo meeting in Jul continued to emphasise many of the key messages from the previous years. The meeting also confirmed that the Fourth Plenum meetings will be held in Oct, which will feature proposals for the 15th Five Year Plan, which is set to focus on high-quality development, innovation, and domestic demand.The meeting maintained the dialogue around fiscal and monetary policy, which indicates that the policy stance will remain on the side of easing. Given the recent stronger-than-expected economic data and what looks like a high possibility for another trade truce extension with the US, the immediate urgency for further policy support does not look as high as it did a few months back. However, with some signs of weakness persisting, especially in weak investment and a renewed downturn of the property market, and with domestic confidence still tepid, policy support remains important to ensure growth stays on track.Boosting domestic demand has been a recent policy focus, and the Politburo meeting continued to emphasise this, calling for deepened implementation of policies to boost consumption, along with further developing service consumption.At the same time, despite stronger-than-expected export performance in H125, the meeting also continued to emphasise supporting the hardest hit exporters, while noting that there was a need to optimise export tax rebate policies and push for free trade zone policies.Managing disorderly competition as well as promoting capacity management in key industries. Depending on how aggressively these policies are pursued, there could be a short-term negative impact even if it is healthier over the long term.15th Five-Year Plan will likely focus on facilitating China's Great Transition: Economic transitions are never easy, even in the calmest of environments – and with external headwinds and uncertainty aplenty, combined with generational shocks such as the Covid pandemic, there have been plenty of pitfalls along the road for China. Numerous short-term challenges have added to longer-term challenges such as demographic shifts and rising debt levels. One of China's benefits amid these challenges is the ability to set longer-term goals and priorities and execute these plans on a longer timeframe, and this will likely continue when the next Five-Year Plan is set. Continued policy emphasis on building out China's domestic demand will help it transition toward a domestic demand economy. It is expected it to expend considerable efforts to compete in future industry and move toward an innovation-driven economy, as well as moving up the value-added ladder in general.