As China’s economic growth decelerates, policymakers have tilted towardensuring stable growth. While the PBOC has in recent months indicated apreference for targeted monetary instruments (re-lending to support decarbonization,clean energy, and SMEs), it announced a 50bp RRR cut onMonday (to be effective December 15), part of which will be used to replacematuring MLF this month. The Politburo also held a meeting on 2022 economicwork, presenting “stability” as the key policy objective for next year—with the emphasis on “stability” usually an indirect way of recognizing neartermdownward growth. In our view, the macro policy tightening in 1H21 hasended, though we do not expect a dramatic shift toward major stimulus. Inparticular, the authorities stated that fiscal policy should “focus on precisionand sustainability,” suggesting that the authorities remain concerned aboutfiscal sustainability (especially regarding local government financing), andfiscal targets will likely stay at a similar level in 2022 compared to this year.Meanwhile, policymakers emphasize that housing policy should ensurehealthy development in the housing market. We expect the authorities willtake actions to avoid tail risk scenarios for the property sector and spilloversto the rest of the economy. While the major direction of housing policy is unlikelyto be reversed, policy fine-tuning will continue to support reasonablehousing demand and affordable housing. In this regard, the annual CentralEconomic Work Conference (CEWC), which is usually held shortly followingthe Politburo meeting, will provide further color on the major policy outlookfor 2022.