China to boost spending, ease monetary policy ahead of US tariffs

SINGAPORE (ICIS)–China has pledged to boost domestic consumption and implement a looser monetary policy amid a looming trade war with the US when Donald Trump takes office in 2025.

The pledges were made on 12 December after the two-day annual Central Economic Work Conference (CEWC) of China’s top officials to set the country’s 2025 economic agenda, according to state-owned news agency Xinhua.

The proactive policy stance largely echoes the recommendations of the Political Bureau of the Communist Party of China (Politburo) on 9 December.

Chinese leaders signalled their aim to reduce the reserve requirement ratio (RRR) of banks, and key interest rates “at an appropriate timing to ensure ample liquidity”, policies that will likely weaken the yuan (CNY).

A weaker yuan would make Chinese exports more competitive in the global market, at a time when they are facing high tariffs from the US.

Ahead of the expected US tariff imposition, Chinese exporters have started to frontload shipping goods to the US in November 2024 following Trump’s victory in the US presidential elections.

China is the world’s second-biggest economy.

The country’s domestic spending, which has been on a downtrend in 2024, will also be tackled, with Chinese leaders urging efforts to “vigorously boost consumption, improve investment efficiency, and expand domestic demand”.

A special campaign dedicated to stimulating consumption should be implemented, and efforts should be made to increase the incomes and alleviate the burdens of low- and middle-income groups, according to the meeting.

Fiscal stimulus measures were introduced around end-September but were deemed insufficient for China to achieve its GDP growth target of around 5% in 2024.

China aims to maintain “steady economic growth” next year, based on the CEWC report, although growth targets and specific stimulus plans will only be released at the National People’s Congress (NPC) in March 2025.

($1 = CNY7.28)