China's macroeconomic policy to raise support for economy in 2024

China's macroeconomic policy is set to amplify support in 2024, a high-profile meeting said on Dec. 12, which experts said appears to signal proactive fiscal expansion in 2024 and more measures to reduce interest rate levels may be on the horizon.

The tone-setting annual Central Economic Work Conference was held in Beijing from Monday to Tuesday as Chinese leaders decided priorities for the economic work in 2024. The conference called for intensifying macro regulation and doing a good job in both expanding domestic demand and deepening supply-side structural reform.

It was pointed out at the conference that next year, the country must adhere to the principle of seeking progress while maintaining stability, promoting stability through progress and prioritizing development before addressing problems, China Central Television reported.

Gong Liutang, a professor of applied economics at Peking University's Guanghua School of Management and a member of the 14th National Committee of the Chinese People's Political Consultative Conference, the nation's top political advisory body, said the expression of "promoting stability through progress" indicates that policymakers are placing more emphasis on maintaining a reasonable GDP growth rate in 2024.

"Such a stance will help bolster confidence, stabilize employment, mitigate risks and boost people's income growth, which will in turn amplify the role of consumption in driving the economy," said Gong, adding he believes a GDP growth target of about 5 percent would be appropriate for 2024.

Fiscal and monetary policies should be harmonized to achieve that goal, Gong said, stressing that there is an urgent need to reduce interest rate levels as subdued inflation intensifies corporates' real cost to service their debt, which has impeded their investment willingness.

The meeting said proactive fiscal policy should be appropriately strengthened and improved in quality and efficiency, while prudent monetary policy should be flexible, appropriate, precise and effective, CCTV reported.

Xiong Yuan, chief economist at Guosheng Securities, said the country's deficit-to-GDP ratio — one of the key gauges of the strength of fiscal expansion — is likely to exceed 3 percent and may even top 3.5 percent next year as the leadership has called for appropriately strengthened fiscal policy.

On the monetary front, Zheng Houcheng, chief macroeconomist at Yingda Securities Co Ltd, said the stress on implementing flexible and appropriate monetary policy implies an overall accommodative policy stance for next year, though the strength of monetary easing may not exceed this year.

The People's Bank of China, the country's central bank, is likely to cut interest rates or the reserve requirement ratio in the first quarter next year, when the economy needs support amid global economic downward pressures while low inflation provides room for easing, Zheng said.

Ivan Gonzalez, CEO of reinsurance and country president of Swiss Re China, said the Chinese government has some flexibility from a policy perspective to cope with external and domestic challenges, which could help China's economy grow by around 4.5 percent in 2024 based on the reinsurer's forecast.