China wrapped up its annual Central Economic Work Conference (CEWC) on December 12, 2024. Led by President Xi Jinping, the two-day closed-door meeting outlined the country’s economic blueprint for 2025. A key focus of the conference was the scale of stimulus needed to bolster China’s growth next year, according to UOB Group economist Ho Woei Chen.
The Central Economic Work Conference (CEWC) echoed the assertive tone set by the Chinese Communist Party’s Politburo meeting on December 9th, reaffirming its commitment to robust policy support in 2025. The conference prioritized stimulating domestic consumption and optimizing investment efficiency as key objectives for the upcoming year.
To achieve these goals, the CEWC outlined a monetary policy stance of “moderate easing.” This involves timely reductions in reserve requirement ratios and interest rates to ensure ample liquidity and align social financing growth with economic and inflationary targets. The People’s Bank of China (PBOC) hinted at another 25-50 basis point cut to the reserve requirement ratio (RRR) before the year’s end. For 2025, analysts anticipate an additional 50-100 basis point reduction in the RRR and a 30 basis point cut in the benchmark 7-day reverse repo rate, leading to a corresponding decrease in loan prime rates.
Source: create.vista.com
Fiscal policy is projected to be more proactive, with an increased fiscal deficit ratio to bolster government spending. This suggests a potential increase in the deficit target to around 4% of GDP, up from the implicit ceiling of 3% in 2024. The government intends to expand the issuance of ultra-long-term special government bonds, potentially doubling the issuance to CNY2 trillion from CNY1 trillion this year. Additionally, the issuance and utilization of local government special bonds are expected to increase, with the National People’s Congress (NPC) quota likely to exceed CNY4 trillion, surpassing the CNY3.9 trillion allocated in 2024.
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