China's economy is projected to grow by around 5% in 2024, as announced by President Xi Jinping, reflecting improved stability and effective risk management. Following a year of uncertainties, the outlook has brightened due to recent stimulus measures. Xi emphasized the importance of proactive policies for sustained growth and acknowledged challenges like weak domestic demand. With plans for a similar growth target in 2025 and potential monetary easing from the People's Bank of China, optimism remains for a resilient economic future.
China's economy is poised for a promising expansion of approximately 5% in 2024, as announced by President Xi Jinping. This declaration indicates that the world's second-largest economy is on track to achieve its official growth target.
At a New Year event, Xi highlighted that the economy is “overall stable and progressing amid stability,” according to remarks published by the official Xinhua News Agency. He emphasized that risks in crucial areas have been effectively managed, with steady employment and prices contributing to a positive economic environment.
While a definitive growth figure will be released next month, Xi’s announcement follows a year marked by economic uncertainties. Initially, growth projections were described as a “target without a plan,” but the outlook has significantly improved thanks to a series of stimulus measures implemented by policymakers since late September. Economists are now forecasting a growth rate of 4.8% for this year.
Xi reaffirmed that support for the economy will extend into 2025 during his New Year’s Eve address to the nation’s top political advisory body. He reiterated the importance of adopting more proactive macroeconomic policies to ensure sustained growth.
In a separate nationally televised address, Xi acknowledged the challenges facing the economy, including external uncertainties and the transition to new growth drivers. However, he urged the nation to remain confident in its ability to overcome these hurdles. “In 2025, we will fully complete the 14th Five-Year Plan, implement more proactive and effective policies,” Xi stated. “As always, we grow in wind and rain and we get stronger through hard times. We must be full of confidence.”
As is customary, Xi reiterated the Communist Party’s stance on Taiwan, asserting, “No one can ever stop China’s reunification,” reflecting Beijing’s long-standing commitment to bringing the self-governing island under its control.
In anticipation of the future, China is expected to establish a 2025 growth target similar to this year's, as top leaders have indicated a willingness to adopt more robust stimulus measures. This proactive approach aims to mitigate any potential impacts from increased US tariffs that may arise with the upcoming presidential transition.
An official GDP growth target will be revealed in March during the annual legislative sessions, with reports suggesting that leaders are inclined to set an annual growth goal of around 5% for next year. Economists surveyed by Bloomberg predict a 4.5% growth rate for 2025.
Key meetings in December saw officials committing to increased public borrowing and spending, as well as monetary easing, to drive growth in 2025. This represents a notable shift in monetary policy, marking the first move to a “moderately loose” stance in 14 years.
Despite these positive developments, the economy continues to face challenges, including weak domestic demand and an uncertain export outlook, which have historically been significant growth drivers. Deflation may persist into the next year, and the property market is still experiencing difficulties.
The initial stimulus measures anticipated for next year may not reach the levels analysts believe are necessary to reverse the downward trajectory in prices. However, there is optimism that officials will amplify support if growth begins to slow, mirroring their approach from this year.
Premier Li Qiang previously provided insights into the nation's growth rate ahead of the official announcement, revealing that the economy grew by 5.2% in 2023 during a speech in Davos. He noted that China managed to achieve this without resorting to massive stimulus.
Looking ahead, the People’s Bank of China (PBOC) may implement its next easing measures by reducing the reserve requirement ratio (RRR), a move previously indicated as possible by the end of 2024. PBOC Governor Pan Gongsheng suggested that adjustments could occur depending on liquidity conditions.
As the PBOC weighs its options, it is essential to consider the need to stabilize the yuan. High-profile easing measures could inadvertently increase depreciation pressures, making careful management crucial. Despite a seasonal rise in cash demand, liquidity in the interbank market remains ample, suggesting a stable financial environment.
Analysts expect that if no cuts occur in December, the PBOC may lower the RRR in January before the Lunar New Year holiday. Over the coming year, it is anticipated that the PBOC will enhance liquidity by trimming the RRR and purchasing additional government bonds, reinforcing the positive outlook for China’s economy.
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