The CEWC will set macro policy tones for 2025; stimulus in stages expected
We expect the upcoming Central Economic Work Conference (CEWC) to recognize the growth headwinds from domestic demand weakness and external uncertainties, although the potential higher US tariffs may not be cited explicitly by the CEWC. Our baseline forecast assumes that a plan of higher US tariffs may be released in Q1 2025 and implemented in stages starting from Q3 2025, potentially indicating a more damaging shock at end 2025 and the year 2026. Therefore, we think the government may also ramp up additional policy support in stages in the coming 2 years, by setting more supportive policy tones for 2025 in CEWC, announcing most of the concrete stimulus measures at the NPC meeting in March 2025, and rolling out additional stimulus in late 2025 and 2026 as more details of potential higher tariffs and other developments become available.
CEWC, NPC meeting, uncertainties and growth target
The CEWC may outline a stronger fiscal expansion with more support for consumption and the household sector, more monetary & credit policy easing, and more support for the property market. Similar to previously, key policy targets (e.g. GDP growth, headline fiscal deficit) and most of supportive measures will be released in the NPC meeting next March, not in the CEWC. Some of the proposed policy targets and measures in the CEWC may be revised in the NPC meeting, if there is any unexpected major shock in the coming 3 months. Some market participants and policy advisors may expect China to set 2025's growth target at "around 5%" again to anchor market expectations, which we think is very challenging to achieve. We see China's GDP growth moderating to around 4% in 2025, as headwinds from the lingering property downturn and potential higher US tariffs may be partly offset by stronger policy support (see China outlook 2025).
Stronger fiscal policy expansion
Following the government’s recent efforts of local government debt swap and highlighting potential room for further fiscal stimulus, we expect the CEWC may call for higher headline fiscal deficit, more issuance of special CGB to support a larger scale of trade-in program of more consumer goods, larger issuance of special LGB to support local debt swap and property inventory destocking. We think the government could also mention the establishment of a subsidy scheme for families with young child/children, and urge local governments and SOEs to pay arrears to the corporate sector.
More monetary and credit policy easing
We think the CEWC may consider changing the monetary policy tone explicitly to an “easing” or “supportive” bias from the “prudent” tone set in the past several years, potentially indicating more monetary easing in the coming year. The CEWC may call for strengthening counter-cyclical adjustment, maintaining ample liquidity (partly to cope with a much larger scale of government bond issuance), further lowering funding costs for the real economy, more monetary & credit support for innovation, green economy, consumer finance and financial market, and facilitating stabilization of the housing market.
Stabilizing housing market as a top task
As the Politburo meeting highlighted in end September, the CEWC may continue to emphasize stabilizing the housing market as a top policy task, calling for more support for the white-list scheme to ensure home deliveries of stalled projects, more meaningful progress on the home destocking program, and pushing for urban village renovation. That said, policy execution is the key. We think it may still take some time for the government to adjust policy design and address the bottleneck restrictions for the destocking program, especially in lowering funding cost and enhancing incentives of local governments and developers (see more in our home destocking report).
More structure reforms and opening-up
We expect the CEWC to call for pushing forward more structure reforms, as the government had committed to in the 3rd Plenum. Some key areas may be highlighted in the CEWC, such as: boosting high quality growth with stronger support for innovation, accelerating the legislation on facilitating the development of the private sector, more progress of hukou urbanization, and more progress in adjusting central and local government fiscal relation. Despite the risk of higher US tariffs and more restrictions, we think the CEWC may reiterate China’s determination to further open up its domestic market and integrate with the global supply chain.
Our baseline forecast expects intensified policy support in 2025-26
We expect a 30-40bp policy rate cut in 2025 and another 20-30bp cut in 2026, faster implementation of property support measures, 2ppt of GDP expansion in augmented fiscal deficit (AFD) in 2025 and another 1ppt expansion in 2026. The expected AFD expansion in 2025 includes a higher headline budget deficit of 3.5-4% of GDP, larger ultra-long special CGB issuance of RMB 2 trillion, and more special LGB issuance of RMB 4.5 trillion or more. We also think the tariff shock may trigger bigger support to household consumption and more structural reforms. Trade-in program of consumer goods may increase to over RMB 300bn (vs RMB 150bn in 2024) with expanded coverage, and subsidies for families with young children could reach RMB 200bn or more per year, in our view. We expect the RMB to depreciate by 5-8% but do not envisage the active use of currency depreciation as a macro policy tool. See more in China outlook 2025.

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