China’s leaders pledged to attain next year’s target for growth and better support the country’s private sector at this year’s Central Economic Work Conference (CEWC), saying more funds will be available to spur domestic demand. The two-day annual meeting sets the economic agenda for the coming year. Though no specific targets were announced for next year, the official readout of the meeting stated major benchmarks would be met through a number of policy changes: a higher fiscal deficit ceiling, more treasury bonds, and cuts to interest rates and the reserve requirement ratio (RRR). “While the impact of external changes deepens and the Chinese economy still faces many difficulties and challenges, we must realize that China’s upward economic trend has not changed yet,” read the statement, urging officials to act with conviction in achieving the tasks set out for the 2021 to 2025 period in a “high-quality” way.
Beijing also reaffirmed its desire to further step up support for private firms by incentivizing investment, limiting “cutthroat competition” viewed as counterproductive, creating uniform standards for market operators, and reining in the excesses of local governments. Investment growth from the private sector, which makes up 60% of national economic output, has stalled as confidence wanes. In setting priorities for its economic policy for 2025, China is emphasizing the need to maintain stable growth, employment and commodity prices through steps including higher deficit-to-GDP ratios, the issuance of ultra-long-term special treasury bonds and interest rate cuts.
The CEWC was chaired by President Xi Jinping, who analyzed the performance of the economy and mapped out economic plans for 2025 in a keynote speech. While noting heightened negative factors from the outside environment and challenges now facing the economy, policymakers reaffirmed the need to forge ahead with high-quality development, comprehensively deepen reform, expand high-level opening-up and develop a modern industrial system. The nation will maintain basic equilibrium in the balance of payments and better synchronize the income growth of residents and economic growth, they added.
“China’s policy rates remain above zero, suggesting there’s still room for further rate cuts,” Betty Wang, Lead Economist with British think tank Oxford Economics, wrote in a research note. “The People’s Bank of China is also exploring ‘unconventional’ measures to expand its balance sheet,” she added. The boosting of domestic demand was highlighted at the conference as a top priority for next year, as policymakers pledged to roll out more initiatives to boost consumption, including increases in the equipment upgrading and consumer goods trade-in programs. Wang said in her note that she expects that the expansion of trade-in programs would contribute approximately 1 percentage point to overall retail sales growth next year. The development of new quality productive forces through sci-tech innovation was underlined at the conference, with authorities set to launch an Artificial Intelligence Plus initiative and foster more emerging sectors. Minister of Commerce Wang Wentao said in a televised interview that the boosting of consumption will be a pillar for economic growth next year. “We will promote the growth of trade in services through greater opening-up, in order to stabilize foreign investment,” he said.
The nation will make sustained efforts to stabilize the real estate market and halt its decline, intensify the redevelopment of urban villages and dilapidated housing, and promote the establishment of a new development model for the real estate sector, leaders at the Conference pledged.
China will adopt a “more active” set of policies to expand domestic demand in 2025 with a “moderately loose” monetary tools – language not used by high-level authorities since the global financial crisis in 2009 – officials said following a meeting of the Politburo of the Chinese Communist Party (CCP) to set the tone for the CEWC. A summary statement included small but significant rhetorical changes hinting at the gravity with which the country’s leadership views present economic conditions. The last time Beijing employed the phrase “moderately loose” to define its monetary policy was in the aftermath of the global financial crisis in 2009, when China’s central bank went all-out to keep the economy afloat. Since then, the policy has been described as “prudent”. According to a note from Huatai Securities, this is the first time since 2001 that China’s authorities have characterized their overarching strategy for fiscal policy as “more active”. These alterations show a determination to buoy China’s economic growth. The meeting vowed to roll out more proactive and effective macro policies to boost domestic demand and spur sci-tech innovation, high-lighting the need to ensure the stability of stock markets and the real estate sector. But the statement added that “the main goals for economic and social development throughout the year will be successfully completed”.
This overview is based on reports by the China Daily, the Global Times and the South China Morning Post.
