Deleveraging financial market and curbing property bubbles top agenda for this year’s NPC

Containing financial leverage and avoiding a property bubble will be the major focuses of the upcoming National People’s Congress (NPC) meeting due to start in Beijing on Sunday.

Curbing risks fueled by easy credit in recent years and taming a capital market increasingly manipulated by capital tycoons, or so called “financial crocs”, are tipped to be the primary objectives of delegates.

The NPC meeting is an annual parliament-style gathering of delegates from all over China, during which China’s premier Li Keqiang is due to declare the annual growth target, fiscal budget and work focus for the government in 2017.

Citi’s chief China economist Liu Li-Gang says deleveraging and the containment of financial risk will be the top priority this year.

“In the past few years, the growth of the real economy has been far behind the growth of debt and financial markets... The monetary policy transmission mechanism is problematic, as liquidity injected via monetary policy easing is mainly absorbed into the financial sector instead of going into the real economy,” Liu and Citi analyst Jin Xiaowen wrote in a research note issued Sunday.

Strengthening financial regulation is key to creating a ‘steady ship’ when it comes to economic policy, the note said, and to ensure a smooth political transition leading to the 19th Party Congress later this year – at which there is expected to be a key leadership reshuffle within the Communist Party.