China may introduce additional policy support for its economy in 2025 in order to address “weak domestic demand”, as well as partially “offsetting external headwinds,” suggested Fitch Ratings Inc in a Monday report.
It follows the release of an official communique after the close of the Central Economic Work Conference last week, in which the Chinese authorities announced a shifting to a “moderately loose” and “more proactive” monetary policy for the coming year, from a previous “prudent” approach.
Such wording on Chinese monetary policy support is aligned with the position expressed by China’s politburo following a meeting held earlier this month, Fitch noted.
“We believe the shift to a moderately loose monetary policy stance increases the potential for policy interest rate cuts beyond the 25 basis points that we currently expect in 2025,” suggested Fitch in its Monday memo.
“Fitch continues to believe fiscal support will play the key role in addressing weak domestic demand and partially offsetting external headwinds, including the high likelihood of significant tariff increase on Chinese exports to the U.S. under the [Donald] Trump administration in 2025,” wrote the institution’s analysts.
They added: “However, we still forecast that the deficit will widen further, from our already elevated projection of 7.1 percent of GDP [gross domestic product] in 2024.”
China’s economic stimulus is seen as being pertinent to Macau as a way to boost consumer sentiment, according to the city’s casino operators and investment analysts.
Bill Hornbuckle, chief executive and president of casino group MGM Resorts International, the parent of Macau operator MGM China Holdings Ltd, said in October that China economic stimulus policy was “relevant” to Macau, but added that the city was still “unique” in terms of its appeal to Chinese customers.
Recent announcements from the Chinese authorities have highlighted an emphasis on boosting consumption domestically, Fitch observed.
It added: “This is likely to be focused on expanding the current consumer goods trade-in programme, but higher pension and medical insurance payouts should also help to support consumption.”
In its global macro outlook for 2025, Nomura also noted its expectation that China “will very likely ramp up” its fiscal stimulus next year, with an “incremental borrowing” at around “2.6 percent” of the country’s GDP.
“However, to deliver a real recovery in 2025, Beijing may have to clear the property market, fix its fiscal system, repair the social welfare system, and ease geopolitical tensions,” wrote the Nomura team.
The Nomura analysts had additional comments following China’s Monday release of November economic activity data, including on retail sales. Last month, China’s retail sales achieved a 3.0-percent year-on-year growth, against a consensus expectation of a 5.0-percent improvement, and Nomura’s own forecast of 4.5 percent.
“The overall disappointing activity data in November supports our view that the recent green shoots might be short-lived…We maintain our forecast for 4.9-percent year-on-year GDP growth in the fourth quarter and 4.8 percent for the whole year, and we expect growth to slow to 4.0 percent in 2025 on the weakness of domestic demand and strong headwinds for exports under Trump 2.0,” wrote the Nomura analysts.
