China Eases Monetary Policy to Boost Slowing Economy

China’s top leaders are adjusting their approach to economic management, pledging a “moderately loose” monetary policy to bolster the slowing economy.

Chinese Premier Li Qiang spoke at a development meeting at the Diaoyutai State Guesthouse in Beijing on Monday, where he criticized nations imposing higher tariffs, suggesting such measures hinder global growth.

Following the meeting, state media reported that leaders will “implement more active fiscal policies and moderately loose monetary policies.” This marks a departure from the 14-year-long “prudent” monetary policy, a shift that energized markets.

The Hang Seng Index in Hong Kong surged by 2.8 percent after the announcement.

“This marks a significant recalibration in their approach, aiming to cushion the anticipated economic shocks,” Stephen Innes of SPI Asset Management noted in a commentary.

What Does “Moderately Loose” Mean?

The policy shift reflects China’s attempt to stabilize its economy amid slowing growth. Measures initiated by the central bank and regulators in recent months have aimed to encourage spending by businesses and households.

Monday’s statement largely reiterated existing promises, but underscored the government’s commitment to fostering economic resilience.

Julian Evans-Pritchard of Capital Economics observed, “The readout leaves little doubt that the shift toward a more supportive policy stance that began in September is still alive and well.” He compared the current measures to the late-2008 policies during the global financial crisis, predicting faster interest rate cuts in the coming year.

The meeting also set the tone for an annual economic planning session to outline policies for the year ahead.

Will New Policies Revive Consumer Spending?

Despite the pledges, China faces significant challenges. The economy is growing more slowly than the official 5 percent target for 2024, while the property market remains weak. Consumer spending has struggled to rebound fully after the COVID-19 pandemic, and youth unemployment remains a concern.

To address these issues, the ruling Communist Politburo promised a “combination punch” of government spending and easier credit to stimulate consumption. Consumer inflation, reported at just 0.2 percent in November, provides room for interest rate cuts, analysts said.

“We must do a good job in people’s livelihood protection and security and stability to ensure the stability of the overall social situation,” the Politburo statement said.

Are Tariffs Hindering Global Growth?

Premier Li did not mention the United States by name but targeted countries imposing restrictive trade measures, implicitly criticizing Washington.

Amid heightened U.S.-China tensions, including export controls on advanced technology, Li said, “If we look at the obstacles to economic globalization, some countries now easily resort to imposing additional high tariffs, erecting barriers of protection.”

Li’s remarks, delivered during meetings with leaders from the World Bank and other financial organizations, highlighted the broader implications of trade barriers on global economic stability.

This article includes reporting from The Associated Press