China has announced a new set of economic policies aimed at accelerating growth in 2025, sparking optimism both domestically and globally.
In a recent meeting of the Political Bureau of the Communist Party of China Central Committee, top leaders outlined strategies to bolster the economy. Key measures include boosting consumer spending, improving investment efficiency, and promoting a higher level of openness to the world.
The announcement had an immediate positive effect on China’s stock markets. On Tuesday morning, the Shanghai Composite Index rose by 2.58%, the Shenzhen Composite Index gained 3.66%, and the ChiNext Index surged 4.88%.
Strong Determination to Stabilize Growth
Economists are noting the government’s commitment to economic stability. The phrase “strengthening extraordinary countercyclical adjustments” was mentioned for the first time, signaling a proactive approach. Zhang Jun, chief economist at China Galaxy Securities, commented that adopting a “moderately loose” monetary policy is significant, as it represents the most relaxed monetary stance, typically seen during times of global financial stress.
China Galaxy Securities anticipates that the central bank will implement aggressive rate cuts and reduce reserve requirement ratios in the coming year. This could mean a reduction of 40-60 basis points in policy rates and a 150-250 basis point cut in reserve requirements.
Focusing on Domestic Demand
Wang Tao, Chief China Economist at UBS, expects increased support for consumer spending. Measures might include expanding trade-in schemes for appliances and boosting government spending on social services.
Structural reforms are also on the horizon to enhance business confidence and improve social welfare. Enhancements to the social safety net, such as better serious illness insurance coverage and improved pension contributions for urban and rural residents, are expected to boost consumption and confidence among citizens, especially migrant workers and those in rural areas.
Real Estate Market Shows Signs of Stabilization
China has made progress in addressing challenges in the real estate sector, with markets showing signs of stabilization. Experts believe that managing local debt risks while stabilizing the housing market is crucial, particularly in smaller cities.
Zhang Jun pointed out that central government intervention could be key. Measures such as implementing centralized commercial housing stockpiling policies that bypass local debt quotas or excluding certain local debts from debt ratio calculations might help balance market stabilization with debt management.
Positive Impact on the Global Economy
China’s economic growth is expected to have a ripple effect across the globe, particularly in Asia. Raymond Ma, Chief Investment Officer for the Chinese mainland and Hong Kong at Invesco, stated, “China’s recovery will create opportunities for other Asian economies by boosting intra-regional trade.”
Ma also predicts that leading Chinese companies will expand their global presence in 2025, leveraging their strengths and broad distribution networks to deliver products efficiently worldwide.
Reference(s):
China to intensify policy support for economic growth in 2025
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