For most market players, talk of stimulus in China tends to be the monetary kind. But as the country unveils its five-year policy blueprint this week, authorities are expected to use fiscal policy in conjunction to steer the economy out of a slowdown.
The 13th Five-Year Plan (FYP), a 100-page document outlining development initiatives for 2016-2020, will be at the center of the country's fifth plenary session that kicks off Monday. Doubling gross domestic product by 2020 from 2010 levels remains the top priority for policymakers but this time around, strategists say more focus will be given to fiscal policy, including increased spending.
The Five-Year Plan should drive home the recognition that Beijing won't follow the standard Wall Street prescription for growth - quantitative easing - but instead, a policy of reforms and infrastructure-based stimulus, explained Mark Tinker, head of AXA Framlington Asia.
Economists widely believe that China's current economic headwinds, as seen by recent third-quarter growth numbers, are a result of both cyclical and structural factors and warrant a medley of monetary measures such as interest rate cuts as well as "mini stimulus," a term popularized last year when Beijing introduced aggressive fiscal support.
The People's Bank of China (PBOC) duly delivered on Friday night local time, cutting the one-year benchmark bank lending rate by 25 basis points to 4.35 percent, effective from Oct. 24. The one-year benchmark deposit rate was also lowered by 25 basis points to 1.50 percent. It was the central bank's sixth rate cut since November.
John Silvia, chief economist at Wells Fargo, told CNBC on Monday that such moves should be seen separately from the long-term structural and regulatory reform China would undertake to manage its transition to a service-based economy, which he said could take "anywhere between three to five to 20 years."
"The interest rate change is more of a cyclical, short-run - what are we going to do now?" he said. "It will help the property sector. I do think it helps, obviously, equity valuations because you're lowering the discount rate applied to equity earning."