China's Economic Policy Shift to Foster Growth

China is set to implement a more active fiscal policy and a moderately relaxed monetary policy starting next year. This change reflects the nation's commitment to directly address economic challenges and promote growth, according to a senior official.

In 2025, for the first time, China will adopt a more proactive fiscal approach and modify its monetary policy, breaking away from 14 years of a cautious monetary stance. This information was shared by an official from the Office of the Central Committee for Financial and Economic Affairs.

The official's statements followed the annual Central Economic Work Conference held in Beijing, where policymakers outlined the strategic direction for the world's second-largest economy.

This shift in policy underscores the central government's concerns regarding persistent domestic economic issues and external factors that could hinder growth.

On a recent Monday, the State Council, which acts as China’s Cabinet, directed relevant authorities to convert the decisions made at the Central Economic Work Conference into actionable plans promptly.

A notable change involves the governance of local government bonds. At a recent State Council executive meeting led by Premier Li Qiang, it was decided to introduce a negative list approach to manage how these special-purpose bonds are utilized.

This new strategy will allow local governments to use these bonds for acquiring land reserves and supporting the purchase of existing commercial housing for public housing projects.

The official emphasized that China can effectively implement countercyclical measures to support the achievement of its economic goals for 2025. Planned adjustments include raising the deficit-to-GDP ratio and lowering reserve and interest rates.

Boosting domestic demand is identified as a strategic priority for the upcoming year, with a special focus on increasing consumer spending. The government plans to enhance consumption capacity and encourage greater willingness among consumers to spend.

To facilitate this, the authorities intend to utilize various policy tools, including increasing direct fiscal investments in consumer sectors and improving the social security framework to foster income growth.

Following the successful rollout of consumer goods trade-in programs this year, the government plans to broaden the scope and funding of these initiatives for the following year, targeting additional product categories and refining the subsidy distribution process.

Investment potential remains a significant part of domestic demand. The official pointed out that the government aims to bolster private sector expectations and promote greater openness for foreign businesses in key industries.

As geopolitical tensions rise and economic globalization faces challenges, it becomes vital for China to implement more initiatives that promote unilateral openness and strengthen global trade relations.

The nation plans to adhere to high standards in international trade rules and expand its network of high-standard free-trade zones.

Further, pilot initiatives for foreign investors will be expanded in sectors such as telecommunications and healthcare, and steps will be taken to gradually open up internet, education, and cultural sectors.

In its efforts to enhance the resilience of foreign trade, China will employ a comprehensive array of tools to assist businesses in exploring new international markets, promoting cross-border e-commerce, and advancing the Belt and Road Initiative.

The real estate market shows signs of stabilizing after a series of supportive housing measures were introduced in September. Continued efforts will be necessary to ensure a stable recovery in the sector next year.

China, Economy, Growth