China's top regulators have pledged to implement measures to stabilize the housing and equity markets while introducing more effective fiscal policies. These efforts follow a key meeting led by President Xi Jinping, where increased stimulus was called for. The government plans to boost demand and regulate land supply in the housing sector, while the China Securities Regulatory Commission aims to strengthen market supervision. The Ministry of Finance will focus on sustained fiscal policies and improved regulations. Despite a modest economic rebound, China's credit expansion has slowed, suggesting that further monetary easing may be necessary. The central bank is expected to cut interest rates and relax financing conditions in the coming months to support the economy.
China's regulators are ramping up efforts to stabilize the housing and equity markets, along with rolling out more effective fiscal policies. These commitments came after a high-level meeting of the country's top leaders, where the need for greater stimulus was emphasized. In particular, the government plans to promote the recovery of the property market through initiatives designed to increase demand and control land supply for new developments. Dong Jianguo, a vice minister at the Ministry of Housing, shared these insights during a conference held earlier this week.
Meanwhile, the China Securities Regulatory Commission (CSRC) intends to step up market monitoring for both futures and spot trading. The CSRC will also tighten supervision of margin trading, derivatives, and quantitative trading, as outlined in a statement posted on its official website. The Ministry of Finance, looking ahead to next year, will focus on more effective fiscal policies, aimed at sustaining the recovery. Part of this strategy includes improving macroeconomic regulations and expanding the issuance and utilization of local government special bonds, which will also cover broader investment areas.
These measures come on the heels of a Central Economic Work Conference in Beijing, where officials, led by President Xi Jinping, pledged to raise the fiscal deficit target for the upcoming year. Notably, for the second time in over a decade, boosting consumption and stimulating overall domestic demand have been identified as the nation's top priorities. Though the Chinese economy has shown some signs of recovery recently, bolstered by government support, the overall confidence remains fragile. This is largely because policies to combat deflation have not been robust enough.
Moreover, data from earlier this week revealed that credit expansion slowed unexpectedly in November, with loans to the real economy, excluding those issued to financial institutions, hitting their lowest level for the month since 2009. This contributed to a decline in overall credit growth, despite an increase in government bond issuance.
Looking ahead, further easing measures seem likely. According to reports from the 21st Century Business Herald, China's central bank plans to cut interest rates and reduce the reserve requirement ratio in a timely manner next year. Wang Xin, director of the research bureau at the People's Bank of China, indicated that the central bank would also intensify monetary and credit supply, ensuring that financing conditions for the real economy are further relaxed.
These steps align with the Politburo's commitment to a "moderately loose" monetary policy for 2025, which is already encouraging a rush of funds into government bonds. In fact, the yield on China's 10-year bonds recently dropped to a record low of 1.776%. On the other hand, the CSI 300 Index of stocks fell by 2.4%, marking its steepest drop in three weeks. The central bank also plans to enhance its management of exchange rate expectations to prevent any shocks in the coming year, according to a senior official.
China's government is taking significant steps to stabilize the housing and equity markets while implementing more effective fiscal policies. While the country has seen some economic improvement, challenges remain, particularly with slowing credit expansion and fragile market confidence. With additional easing measures and a focus on stimulating demand, the central bank is set to continue supporting the economy. These efforts, including monetary policy adjustments and regulatory improvements, are expected to help stabilize markets and foster a more robust recovery moving forward.
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