These statements were made public following the Central Economic Work Conference (CEWC), an annual meeting of the nation’s top leaders, which took place on December 11-12, as reported by state media.
According to national broadcaster CCTV, the CEWC acknowledged that the negative effects of changes in the external environment have intensified.
This year's conference occurs as the world's second-largest economy grapples with a significant property market crisis, elevated local government debt, and sluggish domestic demand. While exports remain one of the few positive aspects, they are now at risk due to potential increases in U.S. tariffs.
The commitments made during the CEWC reflect one of the most dovish stances taken by Communist Party leaders in over a decade, following a recent meeting of the Politburo, the party's top decision-making body.
Zhiwei Zhang, chief economist at Pinpoint Asset Management, noted that the announcements regarding the fiscal deficit increase and interest rate reductions were anticipated.
He emphasized that while the direction of policy is clear, the magnitude of the stimulus will be crucial, with more details likely emerging after the U.S. reveals its tariff plans.
The Politburo indicated that Beijing is prepared to implement the necessary stimulus to mitigate the effects of any tariff increases. Officials stated they would adopt a stance of “appropriately loose” monetary policy, utilize “more proactive” fiscal measures, and enhance “unconventional counter-cyclical adjustments.”
A more proactive fiscal policy is essential, which includes increasing the fiscal deficit ratio and enhancing debt issuance at both central and local government levels, according to the CEWC summary.
Leaders also committed to reducing bank reserve requirements and lowering interest rates "in a timely manner."
This shift towards a more accommodating stance indicates that China is prepared to increase its debt levels, prioritizing growth over financial stability in the short term, as noted by analysts.
During the CEWC, Beijing establishes targets for economic growth, budget deficits, debt issuance, and other key metrics for the upcoming year. While these targets are agreed upon during the meeting, they will not be officially disclosed until the annual parliamentary session in March.
Last month, Reuters reported that government advisors suggested maintaining the growth target at approximately 5% for the next year.
The CEWC summary emphasized the importance of sustaining steady economic growth but did not specify a numerical target.
Tariff Concerns
Trump's tariff threats have unsettled China's industrial sector, which exports goods valued at over $400 billion annually to the United States. Many manufacturers are relocating production overseas to avoid these tariffs.
Exporters warn that the tariffs will further diminish profits, negatively impacting jobs, investment, and overall growth. Additionally, they could worsen China's industrial overcapacity and the deflationary pressures it creates, according to analysts.
A Reuters poll conducted last month projected that China would grow by 4.5% next year, but also indicated that tariffs could reduce growth by as much as 1 percentage point.
This year, Beijing initiated a late stimulus effort with limited success.
In September, China's central bank introduced its most significant monetary easing measures since the pandemic, and in November, Beijing announced a 10-trillion-yuan ($1.40 trillion) debt package to alleviate local government financing challenges.
China is currently grappling with significant deflationary pressures as consumers feel less affluent due to declining property values and limited social welfare. Weak household demand poses a substantial risk to economic stability.
Beijing has made progressively stronger declarations regarding the enhancement of consumption over the year; however, it has provided limited policy measures, primarily focusing on a subsidy program for the purchase of vehicles, appliances, and a select range of other products.
According to the CEWC summary, this subsidy initiative is set to be broadened, and there will be a concerted effort to raise household incomes.
"We must actively promote consumption," the summary emphasized.