China has unveiled a more proactive fiscal policy and a moderately loose monetary policy for 2025, igniting optimism and buoying market sentiment for the coming year.
At a meeting of the Political Bureau of the Communist Party of China (CPC) Central Committee on Monday, China’s top leaders outlined a series of measures aimed at bolstering economic growth. Key initiatives include boosting consumer spending, improving investment efficiency, and promoting high-level opening up.
Market Reaction
The announcement had an immediate impact on the stock markets. On Tuesday morning, A-shares opened higher, with the Shanghai Composite Index rising 2.58 percent, the Shenzhen Composite Index gaining 3.66 percent, and the ChiNext Index surging 4.88 percent.
Experts Weigh In
Economists and analysts are optimistic about China’s economic outlook for 2025. Zhang Jun, chief economist of China Galaxy Securities, highlighted the significance of the phrase “strengthening extraordinary countercyclical adjustments“, noting that it indicates the government’s strong determination to stabilize growth.
“‘Moderately loose’ monetary policy is the most relaxed monetary stance, typically seen during financial crises,” Zhang observed. “The last time it was mentioned was in 2009 and 2010.”
China Galaxy Securities expects the central bank to implement more aggressive rate cuts and reserve requirement ratio reductions in the year ahead. Specifically, they anticipate a cumulative 40–60 basis point reduction in policy rates and a 150–250 basis point reduction in the reserve requirement ratio.
Focus on Domestic Demand
Wang Tao, UBS Chief China Economist, predicts a modest increase in consumption support measures in the coming year. “We expect an expansion of the trade-in scheme for appliances and increased government spending in social areas,” Wang said.
These measures are expected to boost domestic demand and further strengthen economic growth in 2025.
Reference(s):
China to intensify policy support for economic growth in 2025
cgtn.com
