On December 14, 2024, Han Wenxiu, deputy director of the Central Financial and Economic Affairs Commission, announced at an economic forum in Beijing that China's economic growth for 2024 is projected to be around 5%. This growth is expected to contribute nearly 30% to global economic growth, with employment and prices anticipated to remain stable. Additionally, China's foreign exchange reserves are forecasted to stay above $3.2 trillion. [fbb8f613]
This announcement follows a significant shift in China's monetary policy on December 9, 2024, where the Chinese Communist Party (CCP) moved from a 'prudent' to a 'moderately loose' interest rate stance for the first time since the 2008-2009 financial crisis. The policy change aims to support the struggling economy amid concerns over a potential 60% tariff on Chinese imports by incoming US President Trump, set to take effect on January 20, 2025. [19582d42]
During the China Economic Work Conference (CEWC) held on December 10-11, 2024, President Xi Jinping emphasized the need to prioritize consumer demand over traditional infrastructure spending, aiming to bolster the economy in light of these external pressures. Xi's guidance was praised, and the conference underscored a commitment to raise China's budget deficit above 3% of GDP while endorsing plans for a 'moderately loose' monetary policy. Interest rates are expected to be cut further to stimulate growth. [5cbfd89e]
Despite the challenges, Xi expressed confidence in achieving the targeted growth rate. However, many economists remain skeptical, suggesting a more realistic growth rate of 3-4%. [19582d42]
In conjunction with the policy shift, China announced its most significant monetary easing in 14 years on December 12, 2024. The conference acknowledged ongoing challenges, including youth unemployment rates exceeding 17%, which have significantly impacted consumer spending, which only rose by 0.2% in November. [169cad8f]
New data revealed that bank lending in China rose to 580 billion yuan (approximately $79.72 billion) in November 2024, an increase from 500 billion yuan in October, but still falling short of the expected 990 billion yuan. Total new yuan loans for the first 11 months of 2024 reached 17.1 trillion yuan, down from 21.58 trillion yuan a year earlier, indicating persistent weakness in credit demand. [b5a3efab]
In response to these economic challenges, China plans to increase its budget deficit and issue more debt to maintain stable growth. This initiative aims to strengthen the social safety net, including health care and pensions, particularly in light of an aging population. [b6e982cd]
The International Monetary Fund has predicted that China's growth will slow to 3.3% by 2029, down from 5.2% in 2023, underscoring the urgency of targeted stimulus measures as the property market crisis continues to dampen consumer confidence. With 70% of family wealth tied to housing, the government is under pressure to stabilize this sector. [1609b714]
Economists, including Larry Hu, have noted that the monetary easing marks the beginning of a new cycle aimed at bolstering the economy against external pressures. Analysts predict a key policy rate cut of 30-40 basis points in 2025, as the People's Bank of China (PBOC) seeks to enhance liquidity and reduce financing costs for businesses and households. [b5a3efab]
Overall, China's recent monetary policy adjustments and fiscal commitments reflect a proactive approach to countering the anticipated economic fallout from Trump's presidency, with a clear focus on fostering domestic demand and stabilizing the economy amidst global uncertainties. Specific plans regarding these economic strategies are expected to be revealed during the annual legislative session in March 2025. [fbb8f613]