From Bloomberg, December 9:
- Politburo to take ‘moderately loose’ monetary position in 2025
- Readout comes days before key meeting to set economic goals
China’s top leaders plan to loosen monetary policy and expand fiscal spending in 2025, as Beijing braces for a trade war when Donald Trump takes office.
The 24-man Politburo led by President Xi Jinping announced it will embrace a “moderately loose” strategy for monetary policy next year, marking its first major shift in stance since 2011. The body also ramped up language on fiscal policy at their December huddle, vowing to be “more proactive,” accordingnto the official Xinhua News Agency.
Top officials on Monday also made direct pledges to “stabilize property and stock markets” and for the first time promised “extraordinary” counter-cyclical policy adjustment — Communist Party speak for more uncommon tools to boost the economy. Boosting consumption was given greater emphasis, something foreign officials including US Treasury Secretary Janet Yellen have stressed is crucial.
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“The wording in this Politburo meeting statement is unprecedented,” said Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group, adding that points to strong fiscal expansion and big rate cuts. “The policy tone shows strong confidence against Trump’s threats,” he noted, referencing the US president-elect’s vow to impose a 60% tariff on Chinese exports.
The offshore yuan erased losses to trade 0.1% stronger on bets China’s economy will recover due to monetary and fiscal stimulus. The yield on 10-year government bonds slid two basis points to 1.938%. Regional currencies also got a boost from the Politburo readout, with Australian dollar rising 0.3% and New Zealand’s currency trimming losses.
Other highlights of the Politburo meeting:
- Reaffirmed the overall principle of “using progress to promote stability”
- Pledged to continue push for technology innovation and the construction of a modern supply chain
- Vowed to implement economic reforms, including some “iconic” measures
- Repeated a pledge to open up the economy, stabilize foreign investors and trade
- Vowed to strengthen political supervision as part of Xi’s signature anti-corruption drive, suggesting party cadres will face more close scrutiny of their loyalty to China’s top leader.
The readout is the clearest sign yet policymakers intend to intensify a stimulus push launched in September that’s already shown some signs of stabilizing growth. Investors have been clamoring for more fiscal support, and the statement will likely stoke expectations for the budget deficit to be raised next year with a bullish growth goal.
The decision-making body’s December conclave sets the agenda for the larger Central Economic Work Conference that crafts priorities for the following year, such as the annual growth goal. That meeting is set to begin on Wednesday, Bloomberg News reported last week, and its readout could give further clues of China’s policy plans....
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Although the mainland market indices were pretty much flat on Monday Hong Kong's Hang Seng was up 2.76%.
