What to Expect from China’s CEWC Amid Increased Stimulus Talk

China’s CEWC | December 2024

The Central Economic Work Conference (CEWC) will begin on Wednesday, conclude with an announcement on Thursday. This conference, involving China’s top decision-making bodies—the Central Committee of the CCP and the State Council of the People’s Republic of China—sets the economic agenda for the coming year.

China’s political leaders recently signaled a shift towards more accommodative policies. The Politburo, which comprises top Communist Party officials, emphasized plans to adopt a looser monetary stance and implement targeted fiscal measures aimed at bolstering economic growth. Notably, the Politburo highlighted measures to boost private consumption and domestic demand, both of which have been persistent challenges for the Chinese economy.

Chinese equity markets responded positively to this announcement, with the Shanghai Shenzhen CSI 300 Index rising to its highest levels in nearly a month. Analysts believe this reflects optimism over the expected economic measures.

Key Expectations from the CEWC

The CEWC is expected to mirror the Politburo's statements, offering more details on planned stimulus measures. Additionally, the conference will likely outline the economic objectives for 2025, including a potential GDP growth target.

Growth Targets and Policy Measures

• Annual GDP Growth: Analysts at Bank of America (BofA) anticipate China will maintain its annual GDP target of around 5%, though the CEWC may avoid publishing specific numerical targets. Such announcements are often reserved for the National People’s Congress (NPC), held in March.
• Fiscal and Monetary Policy: The CEWC is expected to address measures supporting local government spending, potentially through enhanced debt issuance and better allocation of funds. However, the trend of preferring monetary easing over direct fiscal spending appears set to continue.
• Liquidity Measures: China reduced its benchmark Loan Prime Rate (LPR) several times in 2024, a trend that could persist in 2025. Lowering borrowing costs aims to spur both corporate investment and consumer spending.

Challenges on the Horizon

Despite stimulus efforts, China faces substantial challenges:

1. Trade Tensions: Escalating U.S. tariffs under the administration of President Donald Trump are expected to strain China’s trade-dependent economy.
2. Structural Economic Issues: Weak private spending, high local government debt, and declining export demand remain significant hurdles.
3. Global Economic Trends: A slowing global economy and persistent geopolitical uncertainties could dampen recovery efforts.

Investor Sentiment and Outlook

Investors have repeatedly urged Beijing to prioritize targeted fiscal measures to support growth sectors. While some progress has been made, Beijing’s strategy still leans heavily on monetary tools, such as increased liquidity and rate cuts.

Looking ahead, the CEWC is unlikely to present hard numerical targets for GDP or fiscal policies. More specific details will likely emerge during the National People’s Congress in March. Nevertheless, expectations remain high for the conference to deliver a roadmap for economic stabilization and long-term structural reforms.

Summary: The CEWC will play a pivotal role in shaping China’s economic trajectory for 2025. As Beijing grapples with domestic and external challenges, the focus will remain on boosting local demand, stabilizing key sectors, and mitigating the impact of global economic headwinds.