The 9th Communist Party Politburo meeting proposed implementing a 'moderate easing' monetary policy next year, marking China's monetary policy return to 'moderate easing' from 'prudent' for the first time in nearly 14 years, which has stimulated a significant rise in the China-Hong Kong stock markets. The Shanghai Composite Index opened up 2.58% on the 10th, with a surge in real estate stocks, and the Hong Kong Hang Seng Index opened 3.21% higher.
According to Xinhua News Agency, the Central Political Bureau of the Chinese Communist Party proposed that next year's economic work must implement more proactive fiscal policies and moderate easing monetary policies, strengthen extraordinary counter-cyclical adjustments, stabilize the real estate and stock markets, and mitigate major sector risks and external shocks.
CCTV News reported that China's monetary policy tone has emphasized 'prudent' for many years, and this adjustment to 'moderate easing' is related to the current overall economic situation both domestically and internationally.
Zhao Lian chief researcher, Dong Ximiao, stated that currently, China’s internal and external environments have significantly changed, with insufficient domestic effective demand and greater pressure on enterprise operations. Meanwhile, monetary policies in developed economies in Europe and America have shifted towards easing. Therefore, the adjustment of monetary policy tone by the CCP Central Committee is based on actual conditions and is a further requirement on top of the previously proposed 'effective interest rate cuts.'
This year, the People's Bank of China has reduced the reserve requirement ratio twice by a total of 1%, releasing approximately 2 trillion yuan (1.22 trillion ringgit) in long-term liquidity, and has used a variety of monetary policy tools to guide financial support for the real economy. Data shows that China's broad money supply (M2) balance has exceeded 300 trillion yuan (182.54 trillion ringgit) this year; in the first three quarters of this year, the total loan issuance by major financial institutions exceeded 110 trillion yuan (66.93 trillion ringgit), nearly 8 trillion yuan (4.87 trillion ringgit) more than the same period in 2023.
Furthermore, this year, China’s interest rates have also significantly decreased, with the Loan Prime Rate (LPR) dropping three times cumulative decrease of 0.35% for the one-year LPR, and a cumulative decrease of 0.60% for the LPR over five years. Driven by this, the actual loan interest rates have further decreased. The weighted average interest rate on corporate loans in China has now reached the '3' range, and the mortgage interest rates for ordinary people have also fallen to historic lows.