China pledged on Thursday to increase the nation’s budget deficit, issue more debt and loosen monetary policy to maintain a stable economic growth rate as it gears up in view of probable trade tensions with the United States as President-elect Donald Trump returns to the White House, reported Reuters on Dec 12.
National broadcaster CCTV said the adverse impact brought by changes in the external environment has deepened.
The remarks came following an annual agenda-setting meeting of the country’s top leaders, known as the Central Economic Work Conference (CEWC) held on Dec 11-12.
This year’s meeting was held against a backdrop of severe property market crisis, high local government debt and weak domestic demand. China’s exports, though one of the few bright spots, are facing the threat of higher US tariffs championed by Trump.
The CEWC pledges echo one of the statements released on Monday after a meeting of the Politburo, a top communist decision-making body.
The Politburo said China would switch to an appropriately loose monetary policy stance with more proactive fiscal levers, and step up “unconventional counter-cyclical adjustments.” The CEWC summary, meanwhile, indicated a higher budget deficit and more debt issuance at the central and local government level, in addition to reducing bank reserve requirements and cutting interest rates in a timely manner.
“The direction is clear, but the size of stimulus matters, which we probably will find out only after the US has announced the tariffs,” said Pinpoint Asset Management.
The shift in message tone shows China is willing to go even deeper into debt, prioritising growth over financial risks, according to analysts.
Reuters reported last month that government advisers recommended that Beijing keep its growth target of around 5% unchanged in 2025, considered a challenging feat by the Economist Intelligence Unit.
Trump’s tariff threats have rattled China’s industrial complex, which sells goods worth more than US$400 billion annually to the United States. Many manufacturers have been shifting production abroad to escape tariffs.
Exporters say the levies will further shrink profits, hurting jobs, investment and growth in the process. They would also exacerbate China’s industrial overcapacityand deflationary pressures, analysts said.
A Reuters poll last month predicted China will grow 4.5% next year, but also suggested that tariffs could impact growth by up to one percentage point.
If exports take a hit, China needs to look internally for a new growth engine. But consumers feel less wealthy due to falling property prices and minimal social welfare. Low household demand is a key risk to growth.
Beijing has issued increasingly forceful statements on boosting consumption throughout the year, but it has offered little in real terms apart from a subsidy scheme for purchases of cars, appliances and other goods.
The CEWC summary said the stimulus scheme would be expanded and that efforts would be made to increase household incomes to “vigorously boost consumption.”
