China: Initial takeaways from the CEWC

China held its annual Central Economic Work Conference (CEWC) on 11-12 Dec 2024. The 2-day closed door meeting was chaired by Chinese President Xi Jinping, with the key role to plan the economic work for 2025. Going into the meeting, the focus has been on the size of stimulus to stabilise China’s growth next year, UOB Group’s economist Ho Woei Chen notes.

CEWC repeats policy pledge from Dec Politburo

“The CEWC continued to adopt the strong language from the Chinese Communist Party’s Politburo on Mon (9 Dec), reiterating the pledge to strengthen policy support in 2025. Expanding domestic consumption and improving investment efficiency are at the top of the task list for 2025.”

“Monetary policy will be 'moderately loose' where reserve requirements and interest rates will be cut in a timely manner, maintain sufficient liquidity, and match the growth of social financing scale and money supply with the expected goals of economic growth and overall price levels. The PBOC indicated another 25-50 bps reduction to banks’ reserve requirement ratio (RRR) by year-end. In 2025, we now expect an additional 50-100 bps cut to the RRR and 30 bps cut to the benchmark 7-day reverse repo rate (with loan prime rates to fall by 30 bps).”

“Fiscal policy will be "more proactive” and the fiscal deficit ratio will be raised to increase the intensity of fiscal expenditures. This suggests that the fiscal deficit target could be increased closer to 4.0% of GDP from the implicit ceiling of 3.0%. The government pledged to increase the issuance of ultra-long-term special government bonds (we expect to be doubled to CNY2 tn from CNY1 tn this year) and increase the issuance and use of local government special bonds (we expect NPC’s quota to be raised above CNY4 tn from CNY3.9 tn in 2024).”

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