Growth and stability 'focus' for next year

Growth and structural reforms for the economy were the focus of China's annual Central Economic Work Conference, or CEWC, held from Dec 11 to 12, when top policymakers decided the country's economic priorities for the next year, analysts said.

"The meeting's readout discussed pursuing a 'more proactive fiscal policy' and a call to 'raise the fiscal deficit ratio'," said Jon Taylor, associate dean at the College of Liberal and Fine Arts, and chair and professor at the department of political science and geography, at the University of Texas at San Antonio.

"It recognized that while the country's economy has posted generally stable performance during 2024, the nation faces growth headwinds from domestic demand weakness and external uncertainty," he said.

Anthony Moretti, an associate professor at Robert Morris University, said he believed the measures were a "common sense" approach to ensuring stability.

Moretti saw the focus as twofold, "expanding domestic consumption and ensuring that inflationary pressures are kept in check".

Taylor pointed out that prefacing the CEWC, the Political Bureau of the Communist Party of China Central Committee, the Party's core leadership, announced on Dec 9 plans to boost domestic demand, stabilize the property and stock markets, and address weak consumer consumption.

The meeting pledged that China would switch to a moderately loose monetary policy stance, have more proactive fiscal levers and step up unconventional countercyclical adjustments.

The announcement underscored concerns expressed by both officials and economists regarding China's economy during the past year, Taylor said.

The meeting emphasized the need for China to maintain steady economic growth, keep employment and prices relatively stable, ensure a rough equilibrium in the balance of payments and exchange rate, increase Chinese citizens' income in step with economic growth, and address "involution-style" competition, Taylor said.

Taylor said that while the local property market was beginning to stabilize, China still faced challenges ahead in the next year and beyond, including ensuring supply, accelerating demand and stabilizing prices.

"Local debt is still a major concern and will continue to require a lot of attention, presumably in March during the two sessions (the annual meetings of China's top legislative and political advisory bodies)," Taylor said.

Strong signal

He said that the CEWC provided a strong signal that the specific targets for fiscal and monetary policies will be announced during the National People's Congress meeting in March.

US politics is likely to impact China's economic policy, Taylor said, with the Chinese economy likely to shift its focus amid former US president Donald Trump's return to the White House next year and his proposed tariffs on Chinese goods. Chinese exports could take a substantial hit with US tariff hikes.

Moretti offered a more optimistic perspective on the potential impact of US trade policies. He said he hopes any proposed tariffs are merely a "bargaining tool" and emphasized that ultimately, "US consumers will suffer" if a trade war escalates.

Taylor said he agreed with the general direction set by the CEWC. "Frankly, the time is now to implement stimulus measures and deliver meaningful reforms," he said. "While China's economy faces persistent structural challenges, they can be successfully addressed."

"Swift action and creativity" are needed to tackle the issues of stabilizing and maintaining consistent economic growth, boosting domestic demand, assisting a struggling housing market, improving weak consumer sentiment as well as "handling the challenges of external economic and geopolitical pressures that may arise" with the return of Trump to the White House, Taylor said.