The People’s Bank of China (PBOC) is set to implement interest rate and reserve requirement ratio (RRR) cuts in 2025 to stimulate economic growth, according to Wang Xin, director of the PBOC’s research bureau. This move signals a proactive approach to bolstering the Chinese economy amidst slowing credit expansion and faltering loan demand.
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PBOC to Increase Monetary and Credit Supply Intensity
Wang Xin, speaking at an event on Saturday, confirmed the PBOC’s intention to intensify monetary and credit supply. He highlighted the potential for further RRR reductions from the current average of 6.6%, indicating a commitment to easing financing conditions for the real economy. This comes after November data revealed an unexpected slowdown in China’s credit expansion, raising concerns about economic growth prospects. Easing financing conditions will encourage businesses to invest and help support economic activity.
China Signals More Forceful Stimulus Measures
China’s leadership has indicated a shift towards more forceful stimulus measures in 2025, prioritizing consumption-driven growth. This strategic move aims to rebalance the economy and foster sustainable growth in the face of current economic headwinds. The government recognizes the need to boost domestic demand and encourage consumer spending as a key driver of economic expansion.
Fiscal Expansion Planned for 2025
In addition to monetary policy adjustments, China plans to expand its fiscal deficit in 2025. This will involve increasing the scale of the deficit, issuing more ultra long-term special government bonds, and increasing the issuance of local government special bonds. These measures aim to inject more capital into infrastructure projects and other key areas to support economic activity. This fiscal expansion signals a commitment to utilizing government spending as a tool to stimulate growth.
“Proactive and Promising” Macro Policies Forthcoming
Han Wenxiu, a deputy director at the Office of the Central Financial and Economic Affairs Commission, confirmed that details of more “proactive and promising” macro policies will be unveiled at the annual plenary sessions of the National People’s Congress and the Chinese People’s Political Consultative Conference. These sessions are crucial platforms for outlining the country’s economic agenda and provide further insights into the specific policy measures that will be implemented.
China’s 2024 Growth Target Remains at 5%
Despite the challenges, Han Wenxiu expressed confidence in achieving China’s official growth target of approximately 5% for 2024. This projection reflects the government’s belief that the planned stimulus measures will effectively counter the current economic slowdown and maintain a stable growth trajectory. While challenges remain, the commitment to proactive policy adjustments underscores China’s determination to achieve its economic objectives. The combination of monetary easing, fiscal expansion, and focused stimulus measures suggests a comprehensive approach to navigating economic complexities and ensuring sustainable growth in the coming year.
