The communique released following the Central Economic Work Conference on December 12 echoed the government’s announcement after the Politburo meeting on December 9. The agency anticipates that the move towards a moderately loose monetary policy stance could lead to policy interest rate cuts exceeding the 25 basis points (bps) currently forecast for 2025. Further reductions in bank reserve requirement ratios are also probable, Fitch Ratings said in a press statement.
Fitch further stated that the fiscal support will remain pivotal in tackling weak domestic demand and mitigating external challenges, such as the strong likelihood of substantial tariff hikes on Chinese exports to the US under the Trump administration in 2025.
Fitch cited a continued upward trajectory in general government debt/GDP from persistently high fiscal deficits or weak nominal growth as one of the factors that could lead to negative rating action when it revised the outlook on China’s A+ sovereign rating to negative in April 2024.
Recent announcements have also indicated a greater emphasis on boosting consumption. This is likely to be focused on expanding the current consumer goods trade-in programme, but higher pension and medical insurance payouts should also help to support consumption, concluded the release.
ALCHEMPro News Desk (SG)
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