Hello Everyone! Welcome to China Market Weekly Recap by Yuan Talks!
This week’s narrative centers around two pivotal policy meetings that shape China’s economic direction for 2025.
A meeting of the Politburo, the top decision-making body of the Communist Party of China, made waves by committing to more proactive fiscal policy and adopting a moderately loose monetary policy, a shift from a prudent stance for the first time in 14 years. Also, for the first time, the top leadership pledged extraordinary counter-cyclical adjustments, highlighting a determination to tackle ongoing economic challenges.
Later in the week, the annual Central Economic Work Conference laid out more detailed plans for 2025, pledging to raising the fiscal deficit ratio, issuing more government bonds and cutting interest rates and reserve requirement ratio (RRR) at appropriate times. Long-term government bond yields dipped to historic lows amid growing expectations for further monetary easing.
Regarding the real estate market, policymakers reiterated “halting declines and stabilizing the real estate market”, a phrased first brought out in the Politburo’s meeting in late September.
More positive signs emerged in the housing market after series of supportive policies in the past two months. Home transactions in major cities continued to show strong momentum in early December, with second-hand home transactions posting particularly strong growth. Average 2nd-hand home prices in major cities fell at slower pace in Nov and in particular, price in Shenzhen rose for first time since May 2023.
On the economic data front, November painted a mixed picture. Consumer prices grew at their slowest pace in eight months, while factory-gate price declines narrowed slightly. Exports grew at a much slower pace amid weak external demand, and imports saw their sharpest drop in over a year. New bank loans nearly halved year-on-year and the overall credit expansion missed expectations.
Other news you might be interested. China expanded the private pension scheme nationwide and included government bonds, designated pension savings and index funds into eligible investment products. Railway investment surged to record highs this year, accompanied by a boom in passenger volumes. China’s domestic gaming industry reported record revenue and user numbers in 2024, reflecting the sector’s strong growth trajectory.
The automobile sector posted strong November figures, with production and sales hitting new record highs. Overseas auto sales have been a strong driving force, with exports of plug-in hybrid vehicles skyrocting by 180% while pure electric vehicle exports dipping.
In terms of company spotlight, Xiaomi announced plans to launch its second model, the YU7, in mid-2025, following the release of its all-electric sedan SU7. Goldman Sachs expects the new YU7 will become one of China’s best-selling premium electric SUVs. Porsche, however, revealed plans to reduce its dealerships in China due to declining luxury car sales. Meanwhile, CATL, China’s leading power battery giant, announced a third European battery factory in Spain, partnering with Stellantis to expand their global footprint.