LIVE MARKETS-China taking "whatever is necessary" approach

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CHINA TAKING "WHATEVER IS NECESSARY" APPROACH

China's ongoing economic weakness and stimulus measures to spur growth have been a key investing theme in 2024, and markets will be watching how the recovery pans out in 2025 in the world's second-largest economy.

"The government has worked to rebuild economic confidence through targeted policy measures, including real estate stabilisation, reforms to its capital markets and most recently, a pledge to loosen monetary policy," says Shasha Li Mafli, portfolio manager at Eric Sturdza Group.

"With pent-up household savings – that are estimated at over $6 trillion - there is potential for consumer spending and investment to drive GDP growth beyond the government's 5% annual target."

Analysts polled by Reuters see the economy growing only 4.5% next year.

The re-election of Donald Trump means that road to recovery is likely to be rocky, but Li Mafli believes China's economy is better suited to handle increased tariffs than it may have been previously.

"With China's increasingly diversified trade relationships and reduced reliance on the US, trade risks are likely to be mitigated," Li Mafli says.

"China's authorities will do whatever is necessary, even if in smaller steps than many Western observers expect, to support markets and consumer confidence."

China's main stock market, the CSI 300 .CSI300, is up 16% this year, but all of those gains can be attributed to post-stimulus optimism in September when the index rallied over 20%, its biggest monthly jump since Dec. 2014.

(Samuel Indyk)

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