Observers and business decision-makers in China will definitely lend an attentive ear to the latest news about the annual Central Economic Working Conference, where top officials draw up the roadmap for the coming year.

The report of this year's conference held from December 19 to 21 deserves more careful reading due to the profound changes we witnessed and the severe challenges we are facing.

Based on the concepts or strategies originating from previous conferences, and repeated or stressed this year, we reckon that the overall decision-making framework will remain largely unchanged. In other words, radical changes of the course are unlikely.

“Pursuing progress while ensuring stability” has not departed since 2012. Initially, it was mentioned as a part of the overall strategy, and since 2014 it was upgraded to the “general work guideline.”

Similarly, the “supply-side structural reform as the main task” has been highlighted since 2016.

After the first session of the 19th CPC National Congress held last year, the “new development philosophy,” “three tough battles,” and “innovating and improving macroeconomic regulation” have repeatedly shown up.

These same principles and strategies could very likely lead the economy in the same direction. It is logical to predict that the government could continue the balanced approach to keep the economy growing at a lower but realistic pace between 6.0 and 6.4 percent, given the cyclical weakness and external uncertainties.

On the microeconomic level, however, some significant adjustments will be implemented.

In some key areas, policy measures could become more problem-oriented and rather more accommodative than restrictive.

Calling for further stabilization in six crucial areas (employment, financial market, foreign trade, foreign investment, local investment and overall expectations) and stressing the “counter-cyclical macroeconomic policy” indicate the government's concerns about the performance of the economy and the willingness to treat some of the major problems such as leverage in a flexible and pragmatic manner.

So far the curbing measures on overall leverage have been effective, with total social financing last month declining by 3.17 trillion yuan compared to last year.

Along with that, the fixed investment decelerated from 7.2 percent to 5.9 percent, and the investment to the traditionally favored transportation and logistics slowed down drastically from 15.6 percent to 4.5 percent.

Certain adjustments are badly needed, that could be the reason why the issue of leverage and financial supervision in this year's conference was not highlighted as it was last year.

Some adjustments have been already quietly carried out.

While shadow banking in forms of asset management products under regular bank accounts is still under supervisory pressure, a legitimate back door for such value-added service is opening, with the issuance of the Regulation on Asset Management Subsidiary of Commercial Banks two months ago.

In the coming year, monetary policy could be somewhat proactive.

In this year's conference the leaders called for “continuing the prudent monetary policy,” which could mean that the central bank would continue to take its de-facto easy stance as it did this year, when it cut the required reserve ratio 3 times for the commercial banks and thus released theoretically over 2 trillion yuan in liquidity.

Amid controls over financial leverage, the newly issued loans for the first 11 months this year have reached 15.1 trillion yuan, already 11.6 percent more than the whole year level last year.

To ensure the liquidity supply for private economy, it would establish more financial tools as the innovative Targeted Medium-term Lending Facility (TMLF), which will finance the institutions for their lending to the small enterprises at a lower interest rate.

Some subtle changes concerning the real estate issue could imply that the industry which is under strict supervisory control might get a needed break.

This topic has been addressed in the conference over the past four years; the focus was initially on the high inventory, later on the surging price and asset bubble.

The implemented restrictive measures succeeded in changing public behaviors and expectations; the sales growth by area slowed down from 7.9 percent in November 2017 to 1.4 percent last month and the housing price expectation index dropped from 120 to 112 in the same period (base year 2016 = 100).

The cost for the tightening, however, seemed to outweigh the benefit. The downturn of the property market has dragged down other sectors in the economy; the retail growth has declined from 10.3 percent to 9.1 percent since November 2017; the closely related textile and furniture industry output dropped from 4.0 percent and 9.9 percent to 1.0 percent and 6.2 percent respectively; indirectly correlated automobile industrial output growth decreased from 12.6 percent to 5.9 percent. 

Upholding the two-year-old controlling policy becomes less viable and the need to revamp the related industries becomes increasingly urgent.

The discussion about the issue this time is different. Besides the concept that “housing is not about speculation but habitation,” the guideline also includes new ideas such as “implementing policies in according to the unique needs of the cities” and “specific guidance for different localities,” which I think is giving the green light for differentiated handling and ultimately pave the way for loosening up at least in some cities next year.

The local government of He Ze, a third-tier city in Shandong Province, announced recently that some restrictions on property trade would be lifted. Based on economic conditions and past experiences, we may see more cities follow suit.