VZCZCXRO2564
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #3191/01 3341014
ZNR UUUUU ZZH
P 301014Z NOV 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 6981
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 BEIJING 003191 
 
SIPDIS 
 
SENSITIVE 
 
TREASURY FOR OIA CWINSHIP AND TTYANG 
 
E.O. 12958: N/A 
TAGS: ECON EFIN CH
SUBJECT: CHINA ECONOMY: PARTY POLITBURO MEETS TO 
DISCUSS ECONOMIC DIRECTION 
 
¶1. (SBU) SUMMARY: The Chinese Communist Party (CCP) 
Political Bureau met on November 27 to discuss 
next year's economic policy ahead of the major 
State Council planning session, rumored to start 
December 10.  The official Politburo statement 
released after the meeting called for policy 
continuity and stability in 2010, maintaining a 
mix of "proactive fiscal policy and appropriately 
loose monetary policy."  The meeting apparently 
endorsed a greater focus on consumption, private 
investment, exports and "new" industries, while 
failing to comment on important economic reforms 
up for consideration.  Although the Politburo may 
have achieved a degree of consensus going forward, 
internal debates are expected to continue as China 
assesses the external economic environment and the 
success of its own policies. END SUMMARY. 
 
The Meeting at Face Value 
-------------------------- 
 
¶2. (SBU) As it does every year, the Chinese 
Communist Party Politburo, presided over by Party 
Chairman Hu Jintao, met to set the tone for the 
upcoming government Central Economic Work 
Conference (CEWC).  A statement released upon 
conclusion of the meeting indicated economic 
policy in 2010 will focus on "maintaining 
sustainable and stable macroeconomic policies" and 
"continuing to implement a proactive fiscal policy 
and moderately loose monetary policy" while 
leaving room to adjust to changing conditions. 
 
¶3. (SBU) The meeting, according to official media, 
had five areas of emphasis: 1) improving the 
quality and efficiency of economic growth; 2) 
promoting transformation of China's economic 
development model and structural adjustment; 3) 
furthering economic reform and opening, and self- 
innovation; 4) improving livelihoods and 
maintaining social harmony and stability; and 5) 
coordinating domestic and international factors 
while making efforts to achieve the usual "stable 
and relatively fast" economic growth.  The meeting 
resolved that economic policies should continue to 
promote domestic demand (particularly consumption), 
rational investment growth, structural adjustment 
and "new industry" development, rural economic 
development, energy efficiency and emissions 
reductions, steady trade growth, urbanization, 
employment, and the social safety net. 
 
What's New? 
----------- 
 
¶4. (SBU) A comparison with last year's statement 
revealed a few differences.  On growth, while this 
year's statement stressed policy continuity, the 
2008 meeting stressed new programs to "expand 
domestic demand."  The order in which consumption 
and investment were mentioned have switched, with 
investment listed first last year, and consumption 
first this year.  Possibly more important, in 2008 
the statement called for expanding central 
government investment, while this year's promoted 
private and "rational" investment growth.  Within 
the industrial plans, the statement for the first 
time mentioned "new" or innovative industries.  On 
rural reform, the 2009 statement adds a goal of 
expanding farmer incomes.  The trade section 
dropped a goal of expanding imports to only focus 
on expanding exports.  Finally, the 2009 report 
differed with previous years on the level of 
detail offered about reform, only noting it should 
be "deepened," but failing to list specific areas 
needing reform as in previous years. 
 
The Experts Read the Tea Leaves 
-------------------------------- 
 
¶5. (SBU) Anxin Securities chief economist Gao 
Shanwen was surprised by what he called the 
"double loose policy tune," which made no mention 
of exit timing.  State Information Center Economic 
Forecast Office Director General Fan Jianping 
pointed out that the statement did allow for 
 
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future policy "adjustments" should conditions 
change, underscoring the leadership's concerns 
about 2010 economic performance.  But he suggested 
the failure to mention inflation was an indication 
that the government does not see price levels as a 
major problem in 2010. 
 
¶6. (SBU) Fan thought that listing consumption 
before investment indicated a shift in policy 
focus.  NDRC's Academy of Macroeconomic Research 
Social Development Research Institute Director 
Chen Xinnian observed a move from "expanding 
domestic demand" (which includes investment-driven 
demand) to "expanding consumption." Gao agreed, 
speculating that the Central Government would 
continue to emphasize eliminating unneeded 
production capacity and reducing carbon emissions. 
 
¶7. (SBU) Wall Street Journal reporter Andrew 
Batson told Econoff he was struck by the inclusion 
of wording on urbanization in the statement.  He 
explained that many of his contacts are focusing 
on legalizing and solidifying urban residency as a 
means to promote consumption and economic 
restructuring. 
 
Comment: What Really Happened 
----------------------------- 
 
¶8. (SBU) The annual pre-CEWC Politburo meeting is 
an opportunity for non-State Council officials 
(including provincial and commercial authorities) 
to air their concerns about major economic policy 
initiatives prior to the State Council's planning 
sessions.  Among the policies likely to be debated 
at the CEWC, for example, are exchange rate 
appreciation, restrictions on bank lending to 
their localities and investment projects, and 
allocation of the fiscal pie.  While none of these 
specific issues were addressed directly in the 
Politburo statement, the focus on policy 
continuity certainly sent a strong message to the 
State Council.  Debates on the path forward, 
however, are clearly ongoing.  This year's CEWC 
will apparently be held a couple weeks later in 
the year than in previous years.  Such a delay may 
have been due to a lack of consensus regarding 
next year's policy stance among policymakers. 
 
HUNTSMAN