What to expect from China’s CEWC amid increased stimulus talk

Investing.com-- China is set to kick off  a two-day annual meeting of Communist Party leaders from Wednesday, with the conference expected to provide more cues on the country’s plans for stimulus.

The Central Economic Work Conference will begin on Wednesday, with an announcement expected after the conclusion of the conference on Thursday. The conference is a meeting of China’s top decision-making bodies- the Central Committee of the CCP, and the State Council of the People’s Republic of China. 

China’s political leaders on Monday offered up their most dovish statements yet on plans for more stimulus. The Politburo- a meeting of top Communist Party officials- signaled that the country will adopt a looser monetary policy stance and dole out more targeted fiscal measures to boost growth.

Of particular note was officials’ explicit mention of measures to boost private spending and local demand, which have both been a major headwind for the Chinese economy in recent years. 

Chinese stocks had reacted positively to the Politburo's statement this week, with the benchmark Shanghai Shenzhen CSI 300 rallying to a near one-month high.

The CEWC usually takes its lead from the Politburo meeting, and is expected to provide more insight into the planned stimulus measures. The CEWC is also expected to set the economic agenda for 2025, including a gross domestic product target for the coming year.

Analysts at BofA expect China to maintain its annual GDP target around 5%, but said that policymakers will likely omit announcing numerical targets in the CEWC statement. 

“We expect policy makers to elaborate on measures to ensure local government expenditure, or how to boost debt issuance and allocate funds, at the CEWC,” BofA analysts wrote in a note. 

Investors have repeatedly called on Beijing to enact more targeted fiscal measures to support the economy. But the government has so far provided limited fiscal support, opting instead to inject more liquidity into the economy.

This trend is likely to continue in the coming year, with the CEWC expected to provide more cues on plans for money supply and liquidity measures.

China cut its benchmark loan prime rate several times in 2024, and is expected to slash the rate even further to boost growth. 

Still, the CEWC is unlikely to provide hard numerical targets for the coming year. For those, BofA analysts said the National People’s Congress meeting in March was likely to provide more insight. 

China is expected to ramp up its economic support in the coming months, especially in the face of increased U.S. trade tariffs under incoming President Donald Trump. A renewed trade war with the U.S. is expected to weigh heavily on the world’s second-largest economy.