The Third Plenum, which will be held in Beijing over July 15-18, is the Communist Party’s top decision-making conference during which the country’s major policies for the year ahead and beyond will be set.

Besides expectations for more policy easing to cushion slowing economic growth, a key matter of interest for the market will be consumption tax revenue, currently fully collected by the central government, which may be partly reallocated to local governments.

This reallocation, if implemented, will incentivize local governments to improve domestic consumption and also provide them necessary funds, market participants said.

“The reallocation of consumption tax revenue between central and local governments in the longer term will benefit consumer goods manufacturing and local infrastructure construction... but its boost will be limited in the short term, and consumer goods manufacturing will continue to be constrained by uncertainty in household future income this year, while the infrastructure growth will mainly depend on the strength of central government spending,” said a mill source.