China Announces Shift in Monetary Policy

In a significant move to bolster economic growth, China has announced its intention to adopt an "appropriately loose" monetary policy next year. This decision, reported by state media on Monday (Dec 9), marks the first such shift towards loosening since 2010.

The announcement came from a Politburo meeting, where top Communist Party officials discussed the need for a more proactive fiscal policy and stepped-up "unconventional" counter-cyclical adjustments. According to Xinhua, China must also "vigorously" boost consumption and expand domestic demand "in all directions".

These remarks were made ahead of the annual Central Economic Work Conference, which is set to take place later this week. The conference will outline key targets and policy intentions for the coming year.

In 2025, authorities are expected to adhere to "the principle of pursuing progress while maintaining stability", leveraging progress to ensure stability and drive innovation. Xinhua reported that "a more proactive fiscal policy and an appropriately loose monetary policy should be implemented, enhancing and refining the policy toolkit, strengthening extraordinary counter-cyclical adjustments."

This new wording for the monetary policy marks the first easing of the stance since late 2010, according to official announcements on the Politburo meetings. The central bank has outlined five policy stances - "loose", "appropriately loose", "prudent", "appropriately tight", and "tight" - with flexibility on either side of each.

China adopted an "appropriately loose" monetary policy after the 2008 global financial crisis, before switching to "prudent" in late 2010.