Experts: Moderately Loose Monetary Policy Boosts Confidence and Stabilizes Market Expectations

The Central Economic Work Conference (CEWC) held this year has introduced a moderately loose monetary policy aimed at enhancing economic confidence and stabilizing market expectations, according to financial experts.

The annual CEWC, which took place in Beijing over two days, laid out the economic priorities for China in the upcoming year 2025. Among the key announcements was the decision to adopt a moderately loose monetary policy, which includes potential reductions in the reserve requirement ratio and interest rates at strategic times to ensure that there is adequate liquidity in the market.

Dong Ximiao, the chief researcher at Merchants Union Consumer Finance Company Limited, stated that the shift from a long-standing prudent monetary policy to a more supportive, moderately loose stance reflects the government's commitment to enhancing economic stability. This strategy is expected to lower financing costs for businesses and individuals, thereby providing essential financial support necessary for a sustained economic recovery.

The CEWC's focus on easing bank reserve requirements, along with timely interest rate cuts, indicates an intention to create a more favorable credit environment. Dong emphasized that this approach will facilitate a reasonable money supply, keep interest rates low, and direct capital toward crucial sectors such as technology innovation, green initiatives, and consumer financing.

He added, "This strategy is likely to invigorate innovation and foster internal societal dynamics while enabling finance to play a critical role in supporting national goals and addressing vulnerabilities in the economy."

These discussions also underscored the need for coordinated policy efforts to amplify the overall impact on the economy. Dong called for a stronger alignment among monetary, fiscal, industrial, regulatory, and employment policies to enhance their combined effects.

Pan Xiangdong, the chief economist at the Qi Lai Research Institute, shared similar views, projecting that the People’s Bank of China (PBOC) may implement more aggressive cuts in reserve requirements and interest rates. He asserted that the planned monetary policy will be specifically targeted to expand domestic demand, encourage consumer spending, and stabilize both the property and stock markets.

Economy, Policy, Markets