China Signals Renewed Focus on Economic Growth with Proactive Measures

China has reaffirmed its dedication to driving economic growth following a high-level economic planning meeting that concluded on Thursday. According to a report from state-run CCTV, released after the mainland China markets closed, the government plans to implement a proactive fiscal policy. This strategy includes increasing the fiscal deficit and issuing additional ultra-long-term bonds in the coming year.

Market Response to Economic Stimulus Plans

The iShares China Large-Cap ETF initially rose 0.8% in premarket trading, reflecting investor optimism. However, gains were pared back later in the session. The meeting, presided over by President Xi Jinping, also hinted at a potential shift towards a moderately loose monetary policy, including interest rate reductions to support growth.

Policy Shift Echoes 2008 Financial Crisis Response

This monetary approach aligns with the tone set during the recent Politburo meeting, marking the first use of "moderately loose" monetary policy language since the 2008 global financial crisis. The term signals a heightened focus on stabilising China’s economy amidst challenges, including a potential trade conflict with the United States, especially in light of Donald Trump’s potential return to the presidency.

Looking Ahead: Economic Targets and Policy Directions

China typically unveils its official annual growth and fiscal deficit targets during the parliamentary meeting in March. However, the recent planning sessions clearly outline a proactive approach to overcoming economic headwinds. These measures provide a glimpse into the government’s strategies for tackling domestic challenges and adapting to global economic uncertainties in 2024 and beyond.

(Sources: investing.com, reuters.com)