China’s dovish policy shift may not be enough

The readout from China’s Central Economic Work Conference provides more detailed forward guidance on plans to adopt a more supportive policy stance next year – there will be more rate cuts and a larger fiscal deficit. As usual though, there is not enough detail to quantify how big the boost might be. And while there is talk about supporting consumption, whether that will amount to more than expanding an existing consumer goods trade-in scheme is still not known.

It’s clear that China’s economy will benefit from stronger tailwinds from policy easing in 2025 than it did this year. But many headwinds are also set to intensify, most obviously on the external front. So while we may get a near-term stimulus bounce, we’re still not convinced that policy support will prevent the economy from slowing further next year.