Home Money & Business Business China indicates it is ready to intensify economic support as Trump tariffs approach.

China indicates it is ready to intensify economic support as Trump tariffs approach.

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China indicates it is ready to intensify economic support as Trump tariffs approach.

BANGKOK — Chinese officials convened this week to evaluate and plan economic strategies for the upcoming year, focusing on increasing government expenditure and relaxing monetary policy in a bid to boost investment and consumer spending.

At the conclusion of their two-day Central Economic Work Conference, the ruling Communist Party leaders expressed their appreciation for President Xi Jinping’s direction and committed to diversifying their economic strategies to mitigate risks faced by the second-largest economy in the world. A major concern for them is the imminent threat from President-elect Donald Trump’s potential imposition of high tariffs on Chinese imports after assuming office.

During the meetings in Beijing, various priorities were established, which may lead to significant implications for the economy. Analysts observed that the plans discussed were largely a reiteration of existing policies rather than groundbreaking new initiatives.

China’s economy is demonstrating a sluggish growth pattern, falling slightly short of the leadership’s target growth rate of “around 5%” set for this year. The persistent issues within the real estate sector have adversely impacted business activities. The drop in housing prices and rising joblessness from the COVID-19 pandemic have caused many citizens to increase their savings and reduce their spending, resulting in an oversupply of goods and preventing prices from rising.

Earlier in the year, the government began implementing a series of initiatives aimed at revitalizing consumer spending. These included providing subsidies for exchanging old appliances and vehicles for new ones, enhancing access to affordable housing, and reducing interest rates to make mortgages more accessible.

The official Xinhua News Agency reported that leaders agreed to prioritize “ensuring and improving the people’s well-being,” with plans to offer better healthcare services, strengthen support for the elderly, and implement measures to prevent poverty relapse. Additionally, subsidies may be introduced to encourage families to have more children as the country experiences a declining population.

The leaders also pledged to increase the nation’s deficit, which has historically been maintained at a cap of 3% of GDP, and to stimulate consumer spending by aligning wage growth with economic expansion rates. There are plans to issue more ultra-long-term bonds to facilitate this, although specifics regarding dollar amounts were not disclosed.

China’s national debt-to-GDP ratio sits at approximately 68%, which is significantly lower than Japan’s 250% and the United States’ 120%. However, local governments are struggling with excessive debt, particularly as many workers are earning less or going unpaid. City and regional authorities have racked up substantial debts due to declines in tax revenue from the property market crisis and pandemic, even as their expenditures continued to rise.

Further details concerning increased government spending may be revealed in March during the national legislative session, experts speculated.

In an encouraging move, earlier this week, the Politburo endorsed plans for moderately loose monetary policies, stepping away from the “prudent” approach that had been in place over the last decade. This shift mirrors the strategy implemented in 2008-2010, when the central bank took aggressive measures to ease credit in response to the global financial crisis, according to notes from Tao Wang of UBS.

The People’s Bank of China has already initiated interest rate cuts and decreased reserve requirements for banks, with expectations for additional cuts in the months to come. These efforts are aimed at making financing for housing and investments more accessible as the central bank plays a vital role in stabilizing markets and stimulating economic growth.

While expectations for lower interest rates have driven bond prices upwards, investors seeking clearer insights into forthcoming economic policies expressed disappointment following the meetings. The Shanghai Composite index fell by 2%, while Hong Kong’s Hang Seng index dropped by 2.1%.

Overall, a conservative stance is being adopted as China observes the developments surrounding Trump’s upcoming administration. Xi’s long-term vision for a modern, innovative economy continues to guide the nation’s strategic approach, even as officials fine-tune policies and await potential changes from the U.S.

As the U.S. and other trading partners have tightened restrictions on China’s access to cutting-edge technology, Beijing has responded with targeted countermeasures. Economists suggest that Chinese leaders are hesitant to take drastic steps to bolster the economy—currently growing with inherent fragilities—as they monitor external circumstances.

“Chinese authorities seem to be in a more cautious, reactive mode amid the uncertainty surrounding U.S. tariff plans, complicating their ability to make definitive commitments for now,” stated Yeap Jun Rong of IG. “There remains potential for positive surprises ahead, but this depends on forthcoming policy details.”