Chinese Leaders Signal Stronger Policy Approach to Boost Domestic Demand

Forex - Chinese leaders have signaled a stronger policy approach next year to boost domestic demand. The 24-member Politburo, China’s top decision-making body, promised on Monday to implement a more proactive fiscal policy and a moderately loose monetary policy for the upcoming year.

According to an official reading released by the state-run Xinhua News Agency, they also pledged to strengthen extraordinary counter-cyclical adjustments, increase domestic demand, and stabilize the housing and real estate markets. The meeting on Monday indicated a shift in Chinese policymakers' stance on monetary policy from a “prudent” position to a “moderately loose” one for the first time in more than a decade, suggesting more monetary easing may be on the horizon for 2025.

Meanwhile, economists suggest that the mention of a more proactive fiscal policy indicates Beijing could adopt a larger fiscal deficit during the legislature session in March. Last week, Xinhua commented that China has the capacity to increase its borrowing and fiscal deficit next year.

Officials participating in the monthly meeting also noted that China’s main annual economic and social development goals would be successfully achieved, expressing confidence that the country’s top management would reach the approximately 5% annual growth target set for 2024.

The Politburo's December meeting will occur just a few days before the Central Economic Work Conference, where Chinese leaders are expected to set policy priorities and discuss annual growth targets for the following year. The meeting, scheduled right after the release of China’s November inflation data, highlights that domestic demand remains consistently weak despite efforts to stimulate spending amid an ongoing real estate crisis that has persisted for years.