China will employ “more active” policies to boost domestic demand in 2025, including a looser monetary policy and a more proactive fiscal policy, the Communist Party’s politburo said on Monday.
The statement from the party’s top 24 officials, chaired by Xi Jinping, comes amid signs that stimulus measures introduced in recent months have failed to persuade consumers to spend.
“A more proactive fiscal policy and an appropriately loose monetary policy should be implemented, enhancing and refining the policy toolkit, strengthening extraordinary countercyclical adjustments,” the politburo said. “It is necessary to vigorously boost consumption, improve investment efficiency and expand domestic demand on all fronts”.
The statement calling for “an appropriately loose monetary policy” marks the first easing of China’s monetary policy since 2010 in the wake of the global financial crisis. China’s central bank has five broad policy stances: loose, appropriately loose, prudent, appropriately tight and tight.
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The central bank tightened the stance from “appropriately loose” to “prudent” in 2010 and it has remained the same until now. The wording on fiscal policy has also shifted, from “proactive” to “more proactive”. Consumer prices rose more slowly than expected in November, despite a raft of monetary policy measures that have eased lending rules and cut mortgage rates.
The consumer price index (CPI) rose by 0.2 per cent year on year last month, after a 0.3 per cent increase in October, the national bureau of statistics (NBS) said on Monday.
Much of November’s increase was down to a sharp rise in food prices, which grew by 1 per cent year on year, with the price of vegetables rising by 10 per cent and pork by 13.7 per cent. The producer price index, which measures the prices of goods sold by Chinese manufacturers, fell by 2.5 per cent year on year in November, following a year on year drop of 2.9 per cent in October. Monday’s politburo meeting is set to be followed within a few days by the Central Economic Work Conference, an annual gathering of China’s top economic officials that sets the economic policy tone for the following year.
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The politburo statement has fuelled expectations that 2025 will see more robust stimulus measures designed to encourage consumers to spend.
Weak domestic demand has pushed Chinese manufacturers into focusing on the export market but the external environment is set to become more difficult in the coming months. Incoming United States president Donald Trump has promised to impose a blanket 60 per cent tariff on Chinese imports and other markets are taking measures to protect their markets from some Chinese goods including electric vehicles.
Beijing last week retaliated against fresh US measures limiting the export of semiconductor technology to China by curbing exports to the US of critical minerals and materials. These include gallium and germanium, which are essential for semiconductors, and antimony, which is used in the manufacture of bullets and other weapons.
Premier Li Qiang told a meeting of international economic organisations in Beijing on Monday that China would work harder to overcome problems in boosting domestic demand. And he said China would remain committed to globalisation and the multilateral trading system in the face of global uncertainty and rising protectionism. “Currently, world economic growth is sluggish – economic globalisation and multilateralism are being challenged,” he said. “China is willing to work with all parties to safeguard the basic norms governing international relations and the multilateral trading system.”
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