China Pledges Proactive Fiscal and Monetary Policies for 2025

China’s leaders have outlined plans for a more proactive fiscal approach and moderately looser monetary policy in 2025 to support domestic consumption and stabilize key markets. The announcements were made during a key Politburo meeting led by President Xi Jinping, setting the tone for next week’s Central Economic Work Conference, where policymakers will finalize the country’s economic priorities for the coming year.

Policy Focus: Stabilization and Growth

The Politburo pledged to stabilize the property and stock markets and strengthen “unconventional counter-cyclical adjustments” to sustain economic momentum, according to a CNBC-translated readout. These measures are expected to guide local governments in setting growth and budget targets ahead of the annual parliamentary session early next year.

Growth Target Expectations

China is likely to maintain its GDP growth target at “around 5%” for 2025, similar to this year’s target, though some analysts suggest it could be slightly lower.

President Xi emphasized the need for confidence and a favorable external environment during a recent symposium, saying, “We must affirm the confidence” and “actively build an external environment that is favorable to us,” per a CNBC translation.

Challenges Ahead

While China’s economy is poised to achieve its 2024 growth target, challenges persist, including a prolonged housing market downturn, weak domestic consumption, and potential trade tensions with the U.S. as President-elect Donald Trump prepares to return to office in January.

Recent data highlight these difficulties:

• Consumer Inflation: Annual consumer inflation fell to a five-month low of 0.2% in November, per the National Bureau of Statistics.
• Property Market Struggles: Housing and property markets remain a drag on growth, despite government efforts to stabilize them.

Market Reactions

Following the Politburo readout:

• Hong Kong’s Hang Seng Index surged 2.8%, reversing earlier losses.
• Offshore Yuan strengthened modestly to 7.2776 against the U.S. dollar.
• iShares FTSE China A50 ETF Futures rose more than 3%.
• Chinese Benchmark 10-Year Yields fell to a record low of 1.935%.

Preparing for 2025

The annual Central Economic Work Conference, set to take place December 11–12, will provide more detailed economic priorities and policy direction. Policymakers aim to tackle uncertainties while focusing on measures to bolster growth, stabilize markets, and address external challenges.