Chinese leaders plan to discuss GDP target, and stimulus next week

Next week on Wednesday, the annual closed-door central economic work conference will begin, during which China’s top officials will discuss economic goals and stimulus initiatives for 2025.

According to Bloomberg sources, the two-day summit will be attended by prominent Chinese officials. Investors will be watching to see how the leaders of the world's second-largest economy want to manage fiscal, monetary, and industrial policy.

Last year's summit took place on the same dates and was attended by senior financial regulators and members of the nation's top leadership, including President Xi Jinping. The leaders of the ruling communist party probably won't say anything about the start time of the meeting.

The public will only find out that it has happened when the minutes are released. The exact figures won't be disclosed until March's annual parliament session.

However, investors will scan the statement for indications of the lawmakers' decisions. The return of Donald Trump to the white house brings a tariff war that may demolish bilateral commerce.

Still, senior leaders are expected to debate keeping next year's growth rate in line with the 2024 target of about 5 per cent. Economists from the UBS group and Barclays predict that policymakers will aim for a larger-than-usual deficit, between 3.5 and 4 per cent of GDP.

If that were to happen, the government might borrow additional money to support the struggling economy. Rate cuts and a 1.4 trillion-dollar initiative to rescue distressed local governments are among the several stimulus measures unveiled by authorities since late September.

China is now on course to meet its growth target for this year. However, authorities will likely want to leave some wiggle room in policy in preparation for the incoming US President. Trump has threatened China with two new tariffs in the last week.

The People's Bank of China (PBOC) has pledged plans for a supportive monetary policy to encourage growth next year. This comes ahead of the impending trade war with the US. PBOC governor Pan Gongsheng at a financial forum in Beijing, said, the central bank will “adhere to an accommodative monetary policy stance and orientation” in 2025.

Next year, China’s economy will need monetary policy assistance more than ever before, especially because the US president-elect has promised to put high tariffs on Chinese imports. Since the pandemic, exports have been a major engine of China's economic development, but that forecast is now in jeopardy.

(With inputs from Bloomberg)