The political leadership of the Chinese Communist Party is calling for looser monetary policy and "more proactive" fiscal policies.
The Politburo of the Central Committee of the Communist Party of China announced on Monday its commitment to implementing "more proactive" fiscal policies and "moderately flexible" monetary policies in 2025, which represents a change from its stance over the past 14 years to boost the country's economy in the face of the arrival of Donald Trump at the White House.
At its meeting on Monday, the political body considered that this year is "critical" to achieve the objectives and tasks set out in the '14th Five-Year Plan' under the leadership of Xi Jinping, highlighting the "stable" overall economic performance and the increasing economic strength of China, according to Xinhua news agency.
According to information from the meeting released by the Chinese state agency, the Politburo stressed the need to promote stability through progress, implementing "more proactive fiscal policies and moderately flexible monetary policies," in a change of discourse reminiscent of the response during the crisis between 2009 and 2011, according to the South China Morning Post .
Among the measures to be implemented, the Chinese Communist Party organ has defended the importance of vigorously boosting consumption, improving investment efficiency and expanding domestic demand in all directions.
"We should give full play to the leading role of economic system reform and promote the implementation of historic reform measures," said the summary of the meeting, in which the Politburo called for enriching and improving the policy toolbox, as well as strengthening extraordinary countercyclical adjustments.
The conclave also mentioned the need to stabilize the "real estate and stock markets" in order to promote sustained economic recovery, continuously improve people's living standards, maintain social harmony and stability, complete the goals and tasks of the 14th Five-Year Plan, and lay a solid foundation for a good start to the 15th Five-Year Plan.
"After 14 years of officially characterising monetary policy as 'prudent', the meeting's report instead adopted the 'moderately accommodative' formulation and also promised more proactive fiscal policy and a vigorous boost to consumption," said Julia Evans-Pritchard, chief China economist at Cappital Economics, who said this suggests a supportive policy stance but may disappoint those hoping for a high-impact stimulus.
The Politburo meeting is a precursor to the Central Economic Work Conference later this week, where leaders will agree on key economic goals and priorities for the coming year, he said, adding that the released text "leaves little doubt" of a shift to a more supportive policy stance, which has pushed up Chinese stock prices.
However, he cautions that "this should not be interpreted as confirmation that a large-scale stimulus is in the works," as the only previous case of a similar change in monetary policy formulation was in November 2008, in a very different environment from the current one.
"We expect the People's Bank of China to accelerate the pace of rate cuts next year, but it is unlikely to cut rates as aggressively as it did during the global financial crisis," he said of monetary policy.
China's gross domestic product (GDP) expanded by 0.9% in July-September, substantially higher than the 0.5% growth seen in the second quarter, but slightly below market expectations.
However, compared with the third quarter of last year, the world's second-largest economy grew by 4.6%, slowing by one-tenth of a percentage point from the year-on-year expansion of 4.7% and well below the 5.3% growth seen in the first quarter.
Thus, in the first nine months of 2024, China's GDP growth was 4.8% year-on-year.
