Economists are calling for a robust and proactive approach to macroeconomic policies as China seeks to build momentum heading into 2025. They emphasize the importance of capitalizing on rising expectations and improving confidence to foster economic growth.
With a recent stimulus package announced, China’s economy is expected to show improvement in the fourth quarter, which is crucial for achieving the annual growth target of around 5 percent. Huang Hanquan, head of the Chinese Academy of Macroeconomic Research, predicts a “U-shaped” recovery for the year, with significant momentum anticipated in the final quarter, allowing economic and social development goals to be met.
Strong Policy Measures
Huang noted that recent policies—such as reducing interest rates, lowering banks’ reserve requirements, and decreasing existing mortgage rates—reflect the government’s commitment to economic recovery. “Looking ahead, we must seize the current window of stabilizing expectations and growing confidence to capitalize on the momentum,” he said, advocating for an extraordinary combination of macro policies and significant reform measures.
Zong Liang, chief researcher at the Bank of China, echoed these sentiments, predicting an economic uptick in the fourth quarter as stimulus policies take effect.
Sino-US Economic Dialogue
These discussions come in the wake of a meeting between economic working groups from China and the United States, where Vice-Minister of Finance Liao Min highlighted the comprehensive stimulus measures recently introduced. During the World Bank’s 110th Development Committee meeting, Liao emphasized China’s commitment to countercyclical fiscal adjustments, focusing on resolving local government debt risks, stabilizing the real estate market, enhancing livelihoods, and driving consumer goods upgrades.
Focus on Implementation and Growth
Zhang Bin, deputy director at the Chinese Academy of Social Sciences, stressed the need for effective implementation of these policies to boost economic vitality and address insufficient demand. He stated that the current focus should be on how policies are executed and their intensity. “Policymakers need to increase the intensity of macroeconomic policies to effectively reverse market sentiments and initiate a positive economic cycle,” he explained.
Looking ahead, Zhang anticipates potential fiscal expansion in 2025, suggesting that government spending may need to exceed GDP growth to drive economic activity. He estimates that maintaining a GDP growth target of about 5 percent could require an increase in government debt of approximately 11 trillion to 12 trillion yuan ($1.5 trillion to $1.7 trillion).
Monetary Policy Adjustments
On the monetary front, Zhang noted that there is room for further interest rate cuts. He emphasized that any rate reductions should significantly exceed decreases in price levels to effectively lower real financing costs and stimulate both investment and consumption.
As China navigates these economic challenges, the consensus among economists is clear: decisive and coordinated macroeconomic policies are essential for fostering a resilient economic environment in the years to come.