China/Hong Kong Market Pulse: Central Financial Work Conference Unveils Near-Term Bullish Signals China/Hong Kong Market Pulse: Central Financial Work Conference Unveils Near-Term Bullish Signals China/Hong Kong Market Pulse: Central Financial Work Conference Unveils Near-Term Bullish Signals

China/Hong Kong Market Pulse: Central Financial Work Conference Unveils Near-Term Bullish Signals

Macro 5 minutes to read
Redmond Wong

Chief China Strategist

Summary:  The 2023 Central Financial Work Conference, led by General Secretary Xi, unveiled significant shifts in China's financial policies. It highlighted five core principles, notably omitting the term "deleveraging" and indicating a willingness to support local governments and the property sector. The reduced emphasis on "risks" and the increased focus on the housing sector implied a more accommodative stance. However, the conference signaled a retreat from marketization, giving prominence to governance and anti-corruption efforts. Concerns have arisen about China's productivity and development strategies. In terms of investment, a positive outlook is anticipated for mainland and Hong Kong stock markets, with the potential for a notable Q4 rally.

Key Points:

  • The Central Financial Work Conference indicates notable changes in China's financial sector strategies.
  • Five fundamental principles were emphasized, focusing on Communist Party leadership, serving the real economy, supply-side structural reform, risk management, and governance improvement.
  • The conference refrained from using the term "deleveraging" compared to its 2017 counterpart, suggesting a shift in priorities.
  • The mention of "risks" was reduced, while the housing sector and fiscal support received increased attention.
  • The conference tentatively signaled a move away from marketization, prioritizing governance and combating corruption.
  • Investment implications include a positive near-term outlook for mainland and Hong Kong stock markets.


The Central Financial Work Conference, held on October 30 and 31 and chaired by General Secretary Xi, stands as a pivotal biennial event in the People's Republic of China. This gathering represents the paramount assembly of the Communist Party of China, dedicated primarily to shaping the nation's financial sector governance and charting the strategic course for financial system management. Notably, the 2023 conference marks a departure from the 2017 National Financial Work Conference, as it eliminates the term "deleveraging" and shifts focus towards "optimizing the debt structure." This transition has raised intriguing questions regarding China's financial future, its impact on the real economy, marketization, and investor sentiment.

Key Principles from the Central Financial Work Committee

The Central Financial Work Conference represents the apex of the Communist Party of China's leadership in financial sector governance and the strategic direction of the financial system. In 2017, at the last conference then known as the National Financial Work Conference, China initiated a deleveraging campaign targeting the property sector, shadow banking sector, and local government debts. The conference was originally scheduled for the previous year but was postponed. The conference's official statement emphasized five fundamental principles for managing the financial system: 1) the leadership of the Communist Party of China, 2) serving the real economy and the people, 3) structural reform of the supply side, 4) risk management, and 5) improving governance while combating corruption.

Near-Term Bullish Signals

The 2023 conference diverged from the 2017 event, which prominently featured "deleveraging," as the term is conspicuously absent in the latest readout. While the 2017 statement stressed "strictly limiting the increase in local government debts," the 2023 statement focuses on "optimizing the debt structure of central and local governments." This shift may indicate a willingness by the central government to shoulder a greater fiscal burden to alleviate the financial stress of local governments. Recent actions, such as the approval of RMB1 trillion in additional central government bonds for natural disaster prevention and rehabilitation projects, suggest China is moving in this direction.

The mention of "risks" has also decreased to 16 times in the 2023 conference readout compared to 28 times in 2017. The 2023 readout mentions the housing sector four times, emphasizing macro-prudential risk management, liquidity circulation between the financial system and the housing sector, fund usage supervision, and equitable treatment of state-owned and privately-owned developers. This suggests a more accommodating stance compared to the previous conference's strict approach to highly leveraged property developers. Recently, the Shenzhen State-owned Assets Supervision and Administration Commission of the State Council (Shenzhen SASAC) and the Shenzhen Metro pledged support to Vanke, a leading Chinese developer.

Potential Retreat from Marketization

In 2017, the conference pledged to enhance the market's “decisive role in resource allocation”, protect investor interests, and promote the development of small and medium-sized privately owned financial institutions. These pro-market policy stances are notably absent in the 2023 readout. Instead, the emphasis is on combating corruption and improving governance and supervision of the financial system. The readout explicitly highlights the political nature of financial system management. If implemented, these changes may indicate a shift away from marketization in China's financial system, favouring a smaller number of large state-owned banks and financial institutions.

As we have consistently emphasized, one of China's key challenges in boosting its long-term growth potential is improving productivity. This extends beyond technology and innovation and involves the elimination of inefficiency in resource allocation in economic activities. The subtle message conveyed in the 2023 Central Financial Work Conference suggests China may be heading in the wrong direction in this regard. However, much remains to be seen in the coming weeks as additional policies are rolled out, and notably, the direction taken by the Third Plenary Session of the 20th Central Committee of the Communist Party of China, poised to be held later this year or early next year.

Investment Implications

Despite concerns about a potential retreat from the initiatives of enhancing marketization and support for small and medium-sized financial institutions, the absence of emphasis on deleveraging in the 2023 Central Financial Work Conference paves the way for more supportive financial and fiscal measures for local governments and the property sector in the near term. The mainland and Hong Kong stock markets are likely to benefit from this development in Q4, potentially leading to a significant year-end rally. China internet stocks, trading at an average of 14x forward earnings, offer a high-beta approach to position for a broad market rally with reasonable margins of safety.


The 2023 Central Financial Work Conference reflects tentative changes in China's financial strategies. The omission of "deleveraging" in favour of supporting local governments and the property sector is a notable shift, but concerns about productivity and resource allocation persist. The direction of China's long-term development strategies will be shaped by the Third Plenary Session, and investors should carefully evaluate the implications of these developments, with opportunities expected in mainland and Hong Kong stock markets, as well as Chinese internet stocks in the near term.

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • 350x200 peter

    Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • 350x200 althea

    Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • 350x200 peter

    Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • 350x200 charu (1)

    FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • 350x200 ole

    Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.