China plans to adopt a more relaxed monetary policy next year, alongside a boost in fiscal policy, to stimulate economic growth, according to a recent meeting of top Communist Party officials.
The country aims to focus on expanding domestic demand and consumption. The decision comes ahead of the annual Central Economic Work Conference, where key targets and policy intentions for 2025 will be set.
Stock markets surged following the announcement, with China’s government bonds also rising. Analysts expect a more proactive fiscal approach and an appropriately loose monetary stance in 2025, which could lead to larger interest rate cuts and asset buying.
China’s economy has struggled this year due to manufacturing-focused policies and low household demand. To address these issues, policymakers have already unveiled aggressive measures to stimulate growth, including cutting interest rates and injecting billions of dollars into the financial system.
However, maintaining a 5% growth target in 2025, which faces increased pressure from US President-elect Donald Trump’s tariff threats, will be challenging. Analysts predict that China may reach its target this year but struggling to sustain it next year.
The central bank has outlined five policy stances: “loose,” “appropriately loose,” “prudent,” “appropriately tight,” and “tight.” China last adopted an “appropriately loose” stance after the 2008 financial crisis, before switching to a more cautious approach in 2010.
Source: https://edition.cnn.com/2024/12/09/economy/china-economy-stimulus-intl/index.html