Tang Ke/FeatureChina/`
Workers at a construction site in Yantai, east China's Shandong province, 4 November 2023
Editor's note: Sign up for CNN's “Inside in China” newsletter for what you need to know about the country's rise and its impact on the world.
Hong Kong
CNN
—
China has pledged to strengthen fiscal policy in 2024 to boost its flagging economy.
The announcement came on Friday following a meeting of senior Communist Party officials 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 problems in China's real estate sector.
At Friday's meeting, chaired by President Xi Jinping and attended by the powerful 24-member Politburo, officials pledged to do more According to a report by the official Xinhua news agency, the aim is to increase domestic demand and stabilize foreign trade and investment.
“Next year, [we must] continue to implement a proactive fiscal policy and a prudent monetary policy,” it said. “Proactive financial policy needs to be moderately strengthened, with improved quality and efficiency.”
Fiscal policy is the use of taxes and government spending to influence the economy. Monetary policy usually refers to decisions made by central banks to influence borrowing costs and control inflation.
Officials also reiterated the importance of preventing risks in key areas and “adhering to the principle of not creating systemic risk.”
The Politburo typically meets once a month to discuss policy and make decisions on important issues. The December meeting, as well as the annual Central Economic Work Conference expected later this month, typically sets the tone for economic policy for the coming year.
Friday's meeting came at a critical time for the world's second-largest economy, which is facing increasing problems.
The ongoing downturn in the real estate market has impacted the broader economy and caused turmoil in the vast shadow banking system. Indebted local governments are also facing increasing pressure from the effects of the struggling real estate market. Some of China's biggest developers have already defaulted.
Moody's said on Tuesday it expects China's annual economic growth rate to slow to 4% in 2024 and 2025 and to average 3.8% annually from 2026 to 2030. Structural factors, including weaker demographics, could lead to a decline in potential growth to around 3.5% in 2030, it added.
China expects growth of “around 5%” this year. By comparison, China's economy grew an average of 7.7% per year in the decade before the pandemic, according to BlackRock.
Comments are closed.