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China’s Communist Party leaders said at their much-anticipated annual meeting in Beijing that “vigorous” efforts to boost domestic consumption are the country’s top economic priority.
President Xi Jinping and party leaders also announced plans to widen China’s fiscal deficit and issue more “super long-term” special bonds at the two-day Central Economic Work Conference to set China’s economic policy direction for next year. I promised.
A report on the meeting’s conclusions, released through state media, said China would lower interest rates and reduce the deposits banks must hold as reserves “at an appropriate time.”
The party meeting came after China changed its monetary policy stance to a “moderately accommodative” one on Monday.
The meeting report listed a commitment to “strongly promote consumption” as first on the list of policy priorities.
The Chinese government will expand domestic demand “in all directions” while implementing other “special actions,” the paper said.
The world’s second-largest economy has been mired in deflation for months as consumers and businesses cut back on spending and economic growth remains reliant on exports.
But this export strategy has already upset many of China’s trading partners around the world, and could pose further problems as Donald Trump takes over as US president next year and plans to impose additional tariffs on Chinese goods. is expected to face.
The meeting report said that China is “facing increasingly serious negative impacts from changes in the external environment, and our economy still faces many difficulties and challenges.”
Zhiwei Zhang, chief economist at Pinpoint Asset Management, said it is clear that the Chinese government will step up economic support, but analysts are unsure of the specifics of the leadership’s intentions until there is more clarity on President Trump’s tariff measures. He said he would have to wait for details.
“This week’s policy shift is clearly more important than the policy shift that occurred in the last week of September,” Zhang said, referring to a series of stimulus measures including interest rate cuts.
But the limited details provided by policymakers after this week’s meeting are likely to further disappoint investors who were hoping for a big stimulus package from the Chinese government.
Kelvin Lam, an economist at Pantheon Macroeconomics, said there was still little clarity on what exactly the government would do to boost consumption. “There’s a lack of detail. . . . It’s disappointing the market,” he said.
Lam does not expect the Chinese government to implement measures to stimulate consumption such as cash handouts, but it is possible that the Chinese government will strengthen social security, expand trade-in programs, or stimulate the stock market and increase investment. Said it was expensive.
Share price futures for 50 mega-cap companies in China’s A-share market fell 1.2% immediately after the announcement.
“At this stage, we don’t think the fiscal bazooka that some investors are expecting will be triggered, but the good thing is that fiscal policy will be more accommodating towards 2025 than it has been in the past three months,” Zhu Haibin said. It means becoming a target.” , J.P. Morgan’s chief China economist.
Mr. Zhu said that next year, some kind of economic stimulus measures are expected to result in “the highest budget deficit ever and the highest government bond issuance ever”, adding that ultra-long-term special government bond issuance is expected to reach 2 trillion yuan (2,750 yuan) in 2025. He added that it could double to $1 billion.
Morgan Stanley analysts said early Thursday that investors appeared unconvinced that China’s easing measures would boost the economy.
This explains why China’s 10-year bond yield hit a new year-to-date low despite previous promises of further monetary easing, they said.
