Unconventional and Comprehensive: Interpreting the December 2024 Politburo Meeting (AI Translation)
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专栏作家 章俊
Columnist Zhang Jun
2024年12月9日中央政治局会议召开，总结全年经济工作，并对2025年工作重点做出部署。作为中央经济工作会议的“吹风会”，12月政治局会议一般会确立和公布次年经济和主要政策的总基调，中央经济工作会议进行详细阐述和重点工作安排。因此，通过本次会议的重点内容和重要边际变化，可以一窥2025年经济和政策的大致方向。从本次会议主要内容来看，表述精简有力，政策态度积极程度略超预期。
On December 9, 2024, the Politburo convened to summarize the year's economic performance and outline the key tasks for 2025. Serving as a precursor to the Central Economic Work Conference, the December Politburo meeting typically establishes and announces the overarching tone for the next year's economy and main policies, with detailed elaboration and key task arrangements to be made in the Central Economic Work Conference. Therefore, the primary content and significant marginal changes from this meeting offer insights into the general direction of 2025's economy and policies. Judging from the main content of this meeting, the statements were concise and forceful, and the policy stance was slightly more proactive than expected.
一是超常规逆周期政策开启，以确定性拥抱不确定性。政治局会议首提“加强超常规逆周期调节”，有两层含义：其一，以更加有力的逆周期政策，直面中国经济发展的多重压力，政策重心内移，以确定性拥抱不确定性。其二，政策从被动应对转换为主动出击，更大决定、更大力度解决当前对于社会预期和结构转型造成拖累的不利因素和重大风险。2035年基本实现社会主义现代化的目标要求经济总量或人均GDP“翻一番”，对应十四五~十六五时期的年均GDP增速要到4.7%，十四五作为第一个五年，有必要保持GDP增速在5%以上。我们预计，明年5%的经济增长目标有望维持，在发展中破解各种矛盾问题，以自身工作的确定性应对未来国际局势变化带来的不确定性。
Firstly, an extraordinary counter-cyclical policy is launched to embrace uncertainty with certainty. During the Politburo meeting, it was first proposed to "strengthen extraordinary counter-cyclical adjustments," which carries two implications. The first is to address the multiple pressures on China's economic development with stronger counter-cyclical policies, shifting the policy focus inward to embrace uncertainty with certainty. The second is a shift from passive response to proactive action, making larger decisions and taking stronger measures to address adverse factors and major risks that hinder social expectations and structural transformation. The goal of basically achieving socialist modernization by 2035 requires the economic aggregate or per capita GDP to "double," which corresponds to an average annual GDP growth rate of 4.7% during the 14th to 16th Five-Year Plan periods. It is necessary to maintain GDP growth above 5% during the 14th Five-Year Plan as the first of these five-year plans. We anticipate that next year's 5% economic growth target is likely to be maintained, resolving various contradictions and problems in development and responding to the uncertainties brought by changes in the future international situation with the certainty of its own efforts.
二是实施适度宽松的货币政策，是14年以来首度重提。本次政治局会议提出实施“适度宽松的货币政策”，这意味着货币政策将告别2011年-2024年的“稳健”取向，重回2008年-2010年的“适度宽松”取向。中国货币政策取向按照从紧到松分为三类“从紧”“稳健”“适度宽松”。“适度宽松”是最宽松的取向。展望2025年，我们提高对于中国全年降息、降准的幅度预测，全年可能累计调降政策利率（7天逆回购利率）40-60BP，引导5年期LPR下行60-100BP。全年可能累计降准150-250BP。汇率政策在2025年也可能出现重大转折，人民币汇率的锚可能发生切换，由单一盯住美元，转向更多盯住一篮子货币。适度扩大人民币兑美元的汇率弹性，并保持人民币汇率指数的基本稳定。汇率的弹性将为“以我为主”实施降息创造空间。
The second point is the implementation of a moderately loose monetary policy—a notion being revived for the first time since 2014. The latest Politburo meeting proposed adopting a "moderately loose monetary policy," signaling a shift away from the "prudent" orientation held from 2011-2024, returning to the "moderately loose" orientation of 2008-2010. China's monetary policy orientations are categorized into three types, from tight to loose: "tight," "prudent," and "moderately loose," with "moderately loose" being the most liberal. Looking ahead to 2025, our projection for China's full-year reductions in interest rates and reserve requirements has increased. The total policy rate cuts (7-day reverse repo rate) may accumulate to 40-60 basis points throughout the year, guiding the five-year Loan Prime Rate (LPR) down by 60-100 basis points. Full-year reserve requirement ratio cuts might accumulate to 150-250 basis points. Exchange rate policy could also experience a significant shift in 2025, with the anchor for the RMB potentially transitioning from solely pegged to the U.S. dollar to being pegged more to a basket of currencies. This would moderately expand the RMB's exchange rate flexibility against the dollar, while maintaining overall stability in the RMB exchange rate index. Such flexibility will create room to implement rate cuts driven by domestic priorities.
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- The December 2024 Politburo meeting outlined key economic policies for 2025, proposing more proactive fiscal and moderately loose monetary policies, aiming for over 5% GDP growth.
- Emphasis is on boosting domestic demand, supporting real estate and stock markets, and leveraging technological innovation for industrial growth.
- Reforms focus on regional strategies, economic system reforms, and enhancing private sector participation, with fiscal policies supporting sectors like consumption and real estate.
On December 9, 2024, the Politburo meeting was held to review the year's economic developments and set the agenda for 2025. This meeting acts as a prelude to the Central Economic Work Conference, as it defines the economic priorities and policy directions for the new year. The meeting was characterized by concise and assertive statements, indicating a more active policy stance than anticipated [para. 1].
A key initiative from the meeting is the implementation of extraordinary counter-cyclical policies to manage uncertainties. This entails stronger economic measures aimed at addressing internal and external pressures and targets a GDP growth rate above 5% during the current Five-Year Plan. The overarching objective is to support socialist modernization by 2035, necessitating consistent annual growth of 4.7% [para. 2].
The meeting also signaled a shift to a "moderately loose" monetary policy, a stance not adopted since 2010. This change suggests a departure from the previously "prudent" approach, indicating plans to reduce interest rates and reserve requirements in 2025. The total cuts could reach 40-60 basis points for interest rates and 150-250 basis points for reserve requirements, enhancing domestic economic flexibility [para. 3].
Fiscal policy will become more proactive, continuing the trend of active measures since 2021. The meeting proposed strengthening counter-cyclical adjustments with enhanced coordination between fiscal and monetary policies, possibly supporting areas like consumption and real estate more directly. An anticipated narrow fiscal deficit rate is around 4%, with significant new government debt issuance planned for 2025 [para. 4].
Boosting domestic demand, primarily through consumption, is identified as a priority. The meeting emphasized improving investment efficiency and expanding consumption as a core strategy amid uncertain macroeconomic conditions. Real estate and stock market stability are seen as crucial for reviving consumption through the wealth effect, while policies such as trade-in subsidies are expected to boost demand. Enhancements in social welfare may also support increased domestic consumption [para. 5].
The discussion stressed stabilizing real estate and stock markets to enhance economic vitality and manage systemic risks. The stabilization of these markets is perceived as essential for maintaining consumer confidence and thwarting demand shocks. These measures are expected to address core economic issues and continue into 2025 [para. 6].
Technological innovation is highlighted as a driver for productivity, where focus is placed on building a self-reliant industrial supply chain. This aligns with China's strategic aim to fortify its industry against global uncertainties, particularly in core areas like integrated circuits and advanced materials [para. 7].
Regional strategies are to be bolstered, promoting new urbanization as a growth driver. Policy updates are expected to enhance regional coordination and development, underscoring major initiatives like the Yangtze River Delta integration. Resource allocation and fiscal transfers will support urbanization efforts, balancing quantitative growth with better-quality enhancements [para. 8].
Economic system reforms are proposed to yield tangible results. These reforms encompass reshaping local economic incentives, encouraging private investment, and merging state enterprises to bolster competitiveness. Enhancements in the capital market and addressing "technology-industry-finance" cycles are considered important levers for transformation, aimed at fostering long-term economic stability [para. 9].
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