Although there has been a great deal of rhetoric about structural reform, this does not necessarily bode well for reform prospects. The renewed focus on reducing overcapacity in key ‘old economy’ sectors (such as steel) is clearly at odds with the focus on investment in infrastructure that has been the principal driver of investment growth.

Recall that the most recent data on fixed asset investment showed it increasing by 8.1 percent y/y in January-August, the same pace as in January-July, thanks to the government’s ongoing infrastructure investment drive. Thus, investment in public facilities was up 24.3 percent y/y in January-August but private sector investment growth has been weak, staying at 2.1 percent y/y in January-August. And the NDRC has just approved three airport projects, including a 19.6 billion yuan airport expansion project in the city of Guiyang.

Earlier this week premier Li again said that the government would restructure the economy to sustain growth with outdated production capacity being eliminated but, in practice, capacity reduction has lagged behind even fairly modest targets. For example, steel capacity is meant to be cut by 45 million tonnes in 2016 but only about one-third of this has been achieved in the year-to-date. Recall that at the recent G-20 summit in Hangzhou, president Xi promised to reform the economy by reducing overcapacity and debt so as to maintain a ‘medium-to-high’ rate of growth.

And NDRC vice chairman Hu has said that the authorities would eliminate political barriers to private investment with private businesses being encouraged to participate in projects and most sectors including oil and gas drilling open to private investment. In the last few months there has also been much talk about lowering market entry thresholds for private businesses.

As we often point out, the nature of policymaking in China is such that structural reform efforts often end up as half-hearted compromises. And regular readers know that we have long argued that structural reform would remain subordinated to the needs of countercyclical policy so as to meet the government’s growth target and deliver GDP growth of ‘at least 6.5 percent ‘ (on the official data, which we do not put a lot of store in) as it is now the accepted view in policy circles that growth will be L-shaped, not V-or even U-shaped. Attaining growth of around 6.5 percent will remain the over-riding priority.