China will adopt a “more flexible” monetary policy next year as part of measures to support economic growth, state media reported on Monday citing a Politburo meeting. This change marks the first shift towards flexibility since 2010.
In addition, it will implement a more proactive fiscal policy and reinforce “unconventional” countercyclical adjustments, as reported by Xinhua. The country should also “vigorously boost” consumption and expand domestic demand “in all directions,” the report noted.
These statements come from an official statement after a meeting of the main officials of the Communist Party, the Politburo, and precede the Central Economic Work Conference which will be held this week, which will establish key objectives and policy guidelines for 2025.
In the coming year, authorities should adhere to the “principle of seeking progress while maintaining stability,” taking advantage of progress to ensure stability and drive innovation, according to Xinhua.
“A more proactive fiscal policy and appropriately flexible monetary policy should be implemented, improving and refining the policy toolkit, in addition to strengthening countercyclical extraordinary adjustments,” the report noted.
The new approach to monetary policy represents the first move towards a stance laxest since late 2010, according to official statements from Politburo meetings.
The Asian giant’s plan
The Chinese central bank defined five monetary policy stances: “loose”, “appropriately loose”, “prudent”, “appropriately tight” and “tight”, with some room for flexibility in each. China adopted an “appropriately loose” monetary policy after the 2008 global financial crisis, before shifting to a “prudent” stance in late 2010.
Stocks soar and China bonds post strong rally after Politburo changes stance on monetary policyhinting at greater flexibilityin a movement similar to those adopted in previous crises.
Benchmark 10-year bond yields fell about four basis points to 1.922%, a record low. Hong Kong’s Hang Seng Index (.HSI) rose 2.8% to its highest level in a month.
China’s growth has stalled due to the collapse of the property market, which has hit confidence and consumption. Investors have been eager to bet that the government will intervene to boost the economy.
Source: Ambito
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