China's economy faces numerous challenges, from a housing market crisis to a weakened yuan. The government is actively taking steps to stabilize the situation, aiming to prevent further deterioration before the new U.S. administration.
Housing Market Chaos and Government's Response
The housing sector is facing a downturn: property prices are falling, home sales are shrinking, and citizens' savings are depleting quickly. The government is responding with promises to stimulate demand and manage land supply. Dong Jianguo, a vice minister at the housing ministry, announced plans to stimulate demand and rein in land supply. The Ministry of Finance declares ongoing 'sustained and effective' fiscal policies. There are plans to issue more local government bonds and extend the areas for investment. However, the Central Economic Work Conference decided to increase the fiscal deficit target for 2025 and boost consumer demand.
Credit Slowdown and Monetary Policy
November data showed a sharp decline in credit growth to 2009 levels. The central bank of China plans to cut interest rates and the reserve requirement ratio. Wang Xin, a director at the People's Bank of China, noted a 'moderately loose' monetary policy is planned for 2025. This may mean easier borrowing conditions for producers and entrepreneurs.
Yuan Struggles Under Trade War Fears
The yuan continues to decrease, raising concerns for China. By increasing the macroprudential adjustment parameter for cross-border financing, banks and companies can borrow more foreign loans. PBOC Governor Pan Gongsheng expressed confidence in maintaining a stable foreign exchange market.
China faces serious economic challenges, but the government is confidently taking stabilization measures. However, financial markets continue to show varying behaviors, reflecting uncertainty and investor caution.
