Experts Weigh In on China's Moderately Loose Monetary Policy

At this year's Central Economic Work Conference (CEWC) held in Beijing, a decision was made to adopt a moderately loose monetary policy, which has been received positively by various stakeholders. Experts believe that this policy shift is crucial for boosting confidence and stabilizing market expectations within the economy.

This annual CEWC, which took place from Wednesday to Thursday, outlined key priorities for China's economic strategy for 2025. Among the significant recommendations was the implementation of a moderately loose monetary policy for the upcoming year. The plan includes measures such as lowering the reserve requirement ratio and interest rates when appropriate to ensure that liquidity remains abundant in the market.

Dong Ximiao, chief researcher at Merchants Union Consumer Finance Company Limited, pointed out that moving from a decade-long prudent monetary policy to a more relaxed approach showcases the government’s commitment to supporting the economy. He believes that this transition will help lower overall financing costs for both businesses and individuals, thereby providing critical financial support needed for ongoing economic recovery.

Dong explained that the CEWC's focus on reducing bank reserve requirements and interest rates is a step towards creating an optimized credit environment. He believes that these measures will help to ensure a healthy money supply, maintain lower interest rates, and direct resources toward priority sectors like scientific innovation, green development, and consumer financing.

He further stated, "This strategy will drive innovation and promote the internal dynamics of society, while enabling financial support for major national projects and addressing weaker areas of the economy."

The CEWC also highlighted the need for coordinated policy efforts to maximize their overall economic impact. Dong emphasized the importance of aligning monetary, fiscal, industrial, regulatory, and employment policies to enhance their effectiveness.

Echoing this view, Pan Xiangdong, chief economist at the Qi Lai Research Institute, predicted that the People’s Bank of China would implement further cuts to reserve requirements and interest rates. He suggested that the monetary policy would provide targeted support aimed at boosting domestic demand, enhancing consumption, and stabilizing both the property and stock markets.

monetary, policy, economy