The NPC is expected to keep the supply-side structural reforms topic as its main topic on the macro policy agenda. Their key impact on financial markets is expected to be through the execution and implementation of five priorities: Unwind overcapacity, Destocking, Deleveraging, Lower corporate operating costs and Expand effective supply.
These seem to be more of "structural adjustments" rather than "structural reforms". For both long-term reforms and short-term adjustments destocking and capacity reduction/relocation will be a focus. Even if the adjustments can stimulate China's potential growth in the long run, they might pose strong headwinds to growth in short-term.
The government is likely to reiterate its intentions and to cut capacity in many energy and manufacturing sectors such as cement, coal and iron and steel. These will be helped by social and credit policies to accelerate the exit of uncompetitive companies while controlling social costs of joblessness. However, it is expected to be a strong drag on growth in 2016-2017, as seen in record-low fixed asset investment growth.
Also, additional initiatives are expected to help destocking, particularly in the housing market, and to boost effective supply. Many new and existing measures will tackle housing market inventory. Across-the-board deleveraging is unlikely to take place in the near term. Public and household sectors have limited leverage in contrary to the over-leveraged corporate sector.
"That said, credit expansion to households and government could still be supported by policy measures, while corporate deleveraging could be slow based on international experience", says Barclays.
