The News
As China’s policymakers meet this week to discuss the country’s economic outlook heading into 2025, leader Xi Jinping voiced “full confidence” that the country would hit its economic growth targets — analysts, however, are more skeptical.
Beijing has announced a raft of measures that, together, signal an acknowledgement that the country’s economy is under pressure from US trade blocks and tariffs, as well as tepid demand at home. On Monday, the country shifted its monetary policy stance from “prudent” to “moderately loose,” a move that followed an earlier stimulus package and interest rate cuts, with more planned for 2025. Yet markets have so far been unimpressed, with little sign of a bounce in stocks or commodities tied to China’s economy.
Goldman Sachs economists also warned that China’s rapid debt accumulation “stands out,” a pileup that in other cases has “typically led to slower growth, lower inflation, and falling interest rates in subsequent years.”
SIGNALS
Beijing could pursue growth target at a cost
China seems willing to “do whatever it takes” to achieve its 5% GDP growth target for 2024, economists said, and set it there again in 2025, even as it is unlikely to reach its goal. Beijing wants to show strength in the face of US President-elect Donald Trump’s looming tariffs on Chinese exports. Measures could include the “unusual practice” of artificially weakening the yuan to make exports cheaper, as well as accumulating more government debt, Reuters wrote, realities that Chinese authorities seem to have “by-and-large made peace with.” However, experts cautioned that depreciating the yuan too aggressively may draw backlash and import restrictions from China’s other trading partners.
China’s monetary easing may have limited effects
Despite a series of fiscal stimulus measures, sluggish domestic demand and a prolonged property crisis has deflated China’s economy to the point Beijing is willing to make the change. Economists, however, have warned monetary easing now may be “far less potent than it used to be,” as households and the private sector avoid taking on more debt. Another stimulus may be coming, but the roll out may be “incremental, data-dependent” and the details remain unclear. “In true Chinese fashion, the details are left to the imagination,” a Shanghai-based analyst said.