BEIJING, Dec 12 - China has committed to increasing its budget deficit, issuing more debt, and loosening monetary policy to sustain economic growth as it braces for heightened trade tensions with the United States following Donald Trump's return to the White House. This announcement was made during the Central Economic Work Conference (CEWC) held on December 11-12.
The CEWC acknowledged the adverse effects of external changes on the economy, which is grappling with a property market crisis, substantial local government debt, and weak domestic demand. Exports are threatened by potential U.S. tariff increases.
China's leaders pledged to maintain the stability of the yuan and indicated a possible weakening of the currency next year to counteract punitive trade measures. The CEWC also emphasized a shift towards a more dovish monetary policy and proactive fiscal measures.
During the meeting, it was decided to raise the budget deficit and increase debt issuance at both central and local government levels. Additionally, leaders plan to reduce bank reserve requirements and lower interest rates as needed.
Analysts noted that while the direction of policy is clear, the extent of the stimulus will depend on the U.S. tariff announcements. Maintaining a growth target of around 5% is deemed challenging, especially with the anticipated impact of U.S. tariffs on exports and capital expenditure.
Trump's tariff threats have caused significant concern within China's industrial sector, which exports goods worth over $400 billion annually to the U.S. Many manufacturers are relocating production to avoid these tariffs, which are expected to reduce profits and further strain jobs and investment.
In response to declining consumer wealth due to falling property prices, the Chinese government has announced plans to enhance consumption by expanding subsidy schemes and increasing pensions. The CEWC aims to boost household incomes to stimulate domestic demand.