China vows ‘proactive’ fiscal policy to boost economy in 2024

Workers at a construction site in Yantai, in east China's Shandong province, on November 4, 2023

Workers at a construction site in Yantai, in east China’s Shandong province, on November 4, 2023Tang Ke/FeatureChina/AP

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China has vowed to strengthen fiscal policy in 2024 to boost its flagging economy.

The announcement Friday followed a meeting of top Communist party officials and came just days after Moody’s downgraded its outlook on China’s credit rating to negative from stable.

The ratings agency on Tuesday cited risks related to “structurally and persistently lower medium-term economic growth,” and ongoing troubles in China’s property sector.

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Officials at Friday’s meeting, which was chaired by leader Xi Jinping and attended by the powerful 24-member Politburo, pledged to do more to expand domestic demand and stabilize foreign trade and investment, according to a readout released by the official Xinhua news agency.

“Next year, [we must] continue to implement proactive fiscal policy and prudent monetary policy,” it said. “The proactive fiscal policy must be moderately strengthened, with improved quality and efficiency.”

Fiscal policy is the use of taxation and government spending to influence the economy. Monetary policy typically refers to decisions taken by central banks to influence the cost of borrowing and control inflation.

The officials also reiterated the importance of preventing risks in key areas and “holding to the bottom line that no systemic risk will occur.”

A bank clerk counts RMB (renminbi) yuan banknotes during a money-counting skills contest in Nantong city, east China's Jiangsu province.

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The Politburo usually meets once a month to discuss policy and make decisions on major issues. Its December meeting, along with the annual Central Economic Work Conference that is expected later this month, typically sets the tone for economic policy for the coming year.

Friday’s meeting was held at a critical juncture for the world’s second largest economy, which is facing deepening troubles.

A persistent property market downturn has spilled over to the broader economy, causing turmoil in the vast shadow banking system. Debt-ridden local governments are also facing rising pressure from the fallout of the ailing property market. Some of China’s biggest developers have already defaulted.

Moody’s said Tuesday it expects China’s annual economic growth rate to slow to 4% in 2024 and 2025, and average 3.8% a year from 2026 to 2030. Structural factors, including weaker demographics, could drive a decline in potential growth to around 3.5% by 2030, it added.

China is expecting growth of “around 5%” this year. By comparison, in the decade before the pandemic, the Chinese economy grew 7.7% a year on average, according to BlackRock.

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