China’s Economic Outlook: Anticipating Policy Shifts and Stimulus in 2025 to Boost Demand and Support Macau’s Recovery
China Poised for Economic Stimulus in 2025 Amid Weak Domestic Demand
Macau, December 17, 2024 — Fitch Ratings Inc. has reported that China may introduce additional economic policy support in 2025 as it seeks to address weak domestic demand and counter external challenges. This forecast comes on the heels of the Central Economic Work Conference, during which the Chinese authorities disclosed a shift toward a ‘moderately loose’ and ‘more proactive’ monetary policy for the upcoming year, moving away from a previously ‘prudent’ approach.
Shift in Monetary Policy
The recent remarks from Fitch align with insights shared by China’s Politburo following a meeting earlier this month, indicating a consensus on the need for a more supportive monetary environment. According to Fitch’s Monday memo, the anticipated shift in policy increases the likelihood of interest rate cuts in 2025, potentially exceeding the currently expected reduction of 25 basis points.
‘We believe fiscal support will play the key role in addressing weak domestic demand and partially offsetting the external headwinds,’ Fitch analysts noted. They also highlighted concerns regarding the potential for significant tariff increases on Chinese exports to the United States under the incoming Trump administration, further complicating China’s economic landscape. The analysts predict that the fiscal deficit will widen beyond the already elevated projection of 7.1 percent of GDP for 2024.
Implications for Macau
The economic stimulus measures anticipated from Beijing are especially significant for Macau, where casino operators and investment analysts view these potential policies as crucial for revitalizing consumer sentiment. Bill Hornbuckle, the CEO and president of MGM Resorts International, underscored in October that while China’s stimulus policies would impact Macau, the city retains a distinctive appeal for Chinese customers.
Fitch’s analysis notes that recent announcements from Chinese authorities emphasize a concerted effort to boost domestic consumption. The expected measures include expanding the consumer goods trade-in programme and increasing pension and medical insurance payouts, all geared towards stimulating spending among consumers.
Broader Economic Outlook
Echoing Fitch’s sentiments, Nomura has articulated expectations for a potential ramp-up in fiscal stimulus in 2025, predicting additional borrowing amounting to around 2.6 percent of GDP. However, repairs to the property market, fiscal reforms, enhancements to the social welfare system, and a reduction in geopolitical tensions will be critical for achieving a substantive economic recovery.
In light of the recent release of economic activity data, including November’s retail sales performance—showing only a 3.0 percent year-on-year growth against the expected 5.0 percent—Nomura’s analysts maintain a cautious view. They indicate that the slower-than-expected figures might signal that recent positive trends in the economy may be short-lived. They project GDP growth of 4.9 percent year-on-year for the fourth quarter and an overall annual growth of 4.8 percent for 2024, with a potential decline to 4.0 percent in 2025 due to ongoing weaknesses in domestic demand and robust challenges for exports.
Conclusion
As China prepares to shift its economic policy strategy, both domestic and international observers will be keenly watching how these changes unfold and their impact on the overall economic landscape, particularly in regions closely tied to Chinese consumer behavior, such as Macau. With significant adjustments on the horizon, the global market landscape may be in for a transformative period as the implications of these policies play out.