China will embrace an "appropriately loose" monetary policy next year alongside a more proactive fiscal policy to support economic growth, state media reported on Monday, citing a meeting of top Communist Party officials, marking the first such shift toward loosening in some 14 years.
The world's second-largest economy is battling sluggish domestic consumption, a persistent crisis in the property sector and soaring government debt – all of which threaten Beijing's official growth target for this year.
Leaders are also eyeing the second term of Donald Trump in the White House, with the president-elect indicating he will reignite his hardball trade policies, fuelling fears of another standoff between the superpowers.
On Monday, the Politburo, the country's top decision-making body, "held a meeting to analyze and study the economic work of 2025," state news agency Xinhua said.
China will step up "unconventional" counter-cyclical adjustments, focusing on expanding domestic demand and boosting consumption, Xinhua reported, citing a readout of the Politburo meeting.
The remarks came ahead of the annual Central Economic Work Conference in the coming days to set key targets and policy intentions for next year.
Stocks jumped and China's government bonds rallied following the Politburo meeting readout, with Hong Kong's Hang Seng index climbing 2.8% to its highest in a month.
In 2025, authorities must adhere to "the principle of pursuing progress while maintaining stability," Xinhua said.
"A more proactive fiscal policy and an appropriately loose monetary policy should be implemented, enhancing and refining the policy toolkit, strengthening extraordinary counter-cyclical adjustments," the readout said.
The housing market and stock market must be stabilized, the Politburo added, without giving details.
The new wording for monetary policy marks the first easing of the stance since late 2010, according to official announcements at the Politburo meetings.
"We think it points to strong fiscal stimulus, big rate cut and asset buying in 2025," said Xing Zhaopeng, ANZ's senior China strategist. "The policy tone shows strong confidence against Trump threats" of tariffs.
China's economy has struggled this year, prompting policymakers to act in September, with the central bank unveiling its most aggressive monetary easing since the pandemic, cutting interest rates and injecting 1 trillion yuan ($140 billion) into the financial system, among other steps.
But economists have warned that more direct fiscal stimulus aimed at shoring up domestic consumption is needed to restore full health in China's economy as fears of a renewed trade war with the United States mount.
Underscoring the continued sluggish consumption facing China, official data on Monday showed consumer price growth slowed last month.
The consumer price index, a key measure of inflation, came in at 0.2%, down from 0.3% in October, the National Bureau of Statistics said.
That was below the 0.4% forecast in a Bloomberg survey of economists.
China may just be able to reach its growth target of around 5% this year, but maintaining that pace in 2025 – as Trump returns to the White House having threatened tariffs of 60% or more on Chinese imports – would be a difficult task.
The central bank has outlined five policy stances – "loose," "appropriately loose," "prudent," "appropriately tight," and "tight" – with flexibility on either side of each.
China adopted an "appropriately loose" monetary policy after the 2008 global financial crisis, before switching to "prudent" in late 2010.
In November, China unveiled a 10 trillion yuan debt package to ease local government financing strains and stabilize flagging economic growth. However, the debt measures aim to repair municipal balance sheets as a longer-term objective, rather than directly injecting money into the economy.
President Xi Jinping, at a symposium on Dec. 6, urged full preparation to achieve 2025 economic targets, and said the country's current development faces many challenges, state media Xinhua reported on Monday.
"The readout from the Politburo meeting... is striking all the right notes, with a few notably more dovish phrases and some unusually plainly straightforward pledges," analysts at SG Markets wrote in a note.
Another analyst said the shift "shows the government recognizes the urgency of economic challenges China faces."
And the announcement of efforts to significantly boost consumption in the coming year represents "another positive signal," wrote Zhang Zhiwei, president and chief economist of Pinpoint Asset Management, in a note.
China's economy has shown an over-reliance on manufacturing and exports this year, with household demand disappointing as a severe property market crisis erodes consumer wealth and most government stimulus goes to producers and infrastructure.
Government advisers are recommending Beijing keeps its growth target unchanged next year, but also called for more forceful fiscal stimulus to mitigate the impact of expected U.S. tariffs and fend off deflationary pressures.
Trump's tariff threats have rattled China's industrial complex, which sells goods worth more than $400 billion annually to the United States.
Finance Minister Lan Foan has said more stimulus measures were in the pipeline, without giving details.
Economists have urged Beijing to be more consumer-focused in its policies and offer stronger financial support for low-income residents, while pushing ahead with promised tax, welfare and other policy changes to address structural imbalances.
So far, however, authorities have focused on upgrading the export-reliant manufacturing sector instead, with remarkable success in electric vehicles, solar energy and batteries that has spurred pushback from key trade partners.
With meetings this week intended to set out broad approaches rather than specific policies, Ting Lu, chief China economist at Nomura, wrote in a note that "we expect little from the conference, despite some hyped market expectations."
"Due to the property meltdown, the fiscal crisis, and worsening tensions with the U.S., China's economy is not in a normal downcycle, so it may take much more than the recent 'bazooka' stimulus package to truly reboot the economy," wrote Ting.