DDN Business Insider | Looking ahead to economic trends in 2025: Which sectors shall embrace new opportunities?
Editor's note: As 2024 comes to a close, mainland China is showing a continuous strengthening of its economic policies, aimed at stabilizing the market and boosting domestic demand, which has become a focal point for various sectors. On the international front, with Trump likely returning to the White House, the future of Sino-U.S. relations and the global economic landscape is filled with uncertainties. At this juncture of bidding farewell to the old year and welcoming the new, DDN Business Insider has launched two special segments focusing on the domestic and international macroeconomic environment, as well as hotspots in the stock and real estate markets, taking everyone to review2024 and look forward to 2025.
【Anchor】Hello everyone, welcome to DDN Business Insider. I am Yunfei Zhang. As 2024 comes to a close, mainland China is showing a continuous strengthening of its economic policies, aimed at stabilizing the market and boosting domestic demand, which has become a focal point for various sectors. On the international front, with Trump likely returning to the White House, the future of Sino-U.S. relations and the global economic landscape is filled with uncertainties. At this juncture of bidding farewell to the old year and welcoming the new, DDN Business Insider has launched two special segments focusing on the domestic and international macroeconomic environment, as well as hotspots in the stock and real estate markets, taking everyone to review2024 and look forward to 2025.
The guests for this episode include Lian Ping, Dean of Research Institute of Guangzhou Development District; Yang Delong, Chief Economist at Qianhai Kaiyuan Fund; and Qin Tai, Chief Macro and Financial Real Estate Analyst at Huajin Securities. The three guests will interpret the specific impacts of economic policies and share their economic outlook for next year.
【Anchor】At the end of 2024, mainland China held a series of significant meetings and announced new economic policies. Mr. Lian, what effects and impacts do you think these policies will have in practice?
The recently announced series of policies can be seen as a progressive initiative, starting from late September up to the recent Central Economic Work Conference. It should be said that, for the future period, probably the next 3 to 5 years, these policies are characterized by substantial strength, particularly in macroeconomic fiscal and monetary policies. The local government is likely to increase its borrowing capacity significantly, possibly issuing long-term special government bonds exceeding 2 trillion yuan or more. Additionally, the upper limit on local government debt may also be set higher to address hidden debt pressures.
On the monetary policy side, the tone has shifted to a moderately loose stance, moving away from the previous stable approach. This indicates that we may see reductions in reserve requirements and interest rates, as well as adjustments in various monetary market tools. This is the most distinctive feature of the current policy, mainly aimed at the economic downward pressure that may arise, or already exists, and the new pressures and challenges that may arise in the international market in the future for the Chinese economy, so such a series of more proactive macro policies have been introduced.
Secondly, I think its characteristic lies in its innovation. There is also innovation in this fiscal policy, issuing bonds to support local governments to repurchase land and repurchase commercial housing, these policies are quite innovative.
【Anchor】Yes, mainland China has announced new economic policies through a series of important meetings. Mr. Qin, what is your view on the overall impact of these policies?
From the perspective of fiscal policy, we see a more proactive direction. We can expect an expansion of the general budget deficit in 2025 and an increase in the issuance of special bonds, including long-term special bonds, to enhance fiscal support.
The scale may range between 600 to 800 billion yuan, likely used for securing housing and directly improving liquidity in the real estate market and some relatednew uses. Overall, fiscal policies arelikely to play a more proactive role in supporting economic growth and optimizing the structure in 2025. From the perspective of monetary policies, we can expect a moderately loose stance in 2025, with expectations for reductions in reserve requirements and interest rates. The exchange rate may become more flexible, but we will not actively seek depreciation. Although these policieshavenot suggested a loosening stance for over a decade, it does reflect clearer expectations for interest rate and reserve requirement reductions, as well as a more candid goal of liquidity abundance. The goal of maintaining exchange rate stability still exists.
【Anchor】Good. As we soon step into 2025, Mr. Lian, how do you view the overall trends and performance for the economy in 2025?
In 2025, the external environment may undergo significant changes, introducing high levels of uncertainty. Therefore, many of the policies introduced primarily aim to boost domestic economic activity, focusing on investment and consumption.
The economy is gradually recovering, although there are difficulties and considerable pressure. However, various policies have already been launched to stimulate consumption. We believe that in 2025, under the backdrop of increased fiscal borrowing and higher deficits, more resources will be directed not only towards infrastructure construction but also towards boosting consumption growth. This approach aims to meet both short-term needs and long-term objectives. Thus, we anticipate that consumption will be a key area for policy support and resource allocation. With steady growth in consumption, we can mitigate the negative impacts of potentially declining export growth. Consumption can be further strengthened through various resource inputs and targeted policies, and it should be said that there is still considerable space for it to be boosted and increased.
We expect consumption growth in 2025 to significantly outpace that of 2024, allowing domestic demand to show a marked recovery in comparison. Therefore, we believe that China's economic growth rate could remain around 5% in 2025. If we effectively respond to external shocks and manage them well, the economic growth rate in 2025 may be slightly higher than 5%.
【Anchor】Good, I noticed you emphasized consumption. What support measures do you anticipate will be introduced for consumption?
I think there are several aspects that are likely to be clear. The first is to support households facing difficulties, particularly those suffering from insufficient income or employment issues. Additionally, there will be support for the sales of major consumer goods, especially durable goods like automobiles, which may receive subsidies. Moreover, various policies will be introduced in areas related to livelihood security to significantly enhance the level of social welfare, including overall pension increases. Through these measures, we aim to leverage fiscal resources to boost market consumption willingness and capacity, indicating that there are still many areas to explore.
【Anchor】Withthe new year approaching, Mr. Yang, what overall trends do you see for the economy in mainland China in 2025? What challenges should we pay attention to?
The performance of our macro economy in 2025 is worth looking forward to. Although it's difficult to return to a period of rapid growth, we can expect some recovery in economic growth. External demand may experience a decline in tariffs on trade partners due to Trump's potential return to power, but internal demand is expected to strengthen. In particular, the real estate market, which comprises a significant portion of household wealth, will see more executed policies to stimulate demand. Tier-one cities may gradually loosen purchasing restrictions, and financial support for real estate companies will be increased, stabilizing the overall real estate market. As a pillar industry of the national economy, stability in real estate will contribute to overall economic stability.
【Anchor】Mr. Qin, what are your predictions for the economic performance in mainland China for the coming year?
Looking ahead to the economic performance of China in 2025, we see both new challenges and favorable opportunities. Overall, we can analyze this from several aspects. Firstly, against the backdrop of the extreme tariff proposals from the United States, we might face a more severe external environment. Recently, the EU's increased tariffs on China's new energy vehicles have started to suppress exports. The impact of U.S. steel and aluminum tariffs has also shown some initial impact in recent data. If Trump returns to the White House, his broad and targeted tariff proposals are likely to advance quickly. In this scenario, global export growth may significantly decline again. China, facing higher targeted tariffs and increased costs from broad tariffs, could see its export growth also experience a substantial drop. Overall, we anticipate that net exports will contribute less to economic growth in 2025 compared to the stronger performance in 2024, making the promotion of durable goods consumption a key policy countermeasure.
Assuming subsidies for durable goods consumption, we expect to see an L-shaped turning point in the real estate market in 2025. Consequently, retail sales of consumer goods may also exhibit more positive growth. From an infrastructure investment perspective, we are currently observing a new round of debt restructuring plans, which can enhance the efficiency of debt financing across society. However, this might also lead to a divergence in social financing and credit growth. Overall, we predict that the growth rate of infrastructure investment in 2025 will be relatively close to that of 2024. From the perspectives of fiscal and monetary policy, we expect a more proactive fiscal policy combined with a moderately loose monetary policy for precise support. In summary, we anticipate that the actual economic growth rate in 2025 will seek a favorable and precise balance between maintaining growth, optimizing structure, and stabilizing the currency. We project an actual economic growth rate of around 4.5%, which should be achievable.
【Anchor】After discussing the domestic situation, we cannot ignore the changes in the external environment, particularly Trump's reelection. Mr. Lian, with less than a month to go until Trump's inauguration, what expectations and preparations should China have regarding the economic impact of his presidency?
As a president, Trump has a strong business background, which means he will both aim to maintain the U.S. hegemony and introduce various related policies, while also seeking to secure benefits for the U.S., particularly in business. This is a key characteristic of his presidency. Another significant trait is his unpredictability, often leading to a series of changes. Therefore, Trump's characteristics imply that the uncertainty surrounding U.S. policies will significantly increase. Currently, it is very difficult to analyze and predict the future trend of U.S. policies in many aspects because it is very challenging due to a lack of logical consistency, making it hard to analyze and discuss. Overall, the situation is unclear and highly dynamic.
From a global perspective, U.S. policies will not only affect China but also its allies, possibly leading to policies that contradict or significantly differ from the wishes of those allies, such as increased tariffs on trade, military spending, and stances on geopolitical issues. These are areas we need to pay close attention to.
【Anchor】Considering Trump's policy orientation and possible diplomatic strategies, Mr. Qin, how do you see the impact of the external environment on China's economic development in the near future?
Trump's return to the White House could lead to new economic data deviations and disturbances in overseas markets. Our outlook suggests that after Trump returns, he will likely push the current rare policy triangle combination of expansionary fiscal policy, monetary easing, and protectionism, even to the extreme. More aggressive tariff measures, larger-scale fiscal expansion and tax cuts may lead to a new surge in labor demand in the U.S. Additionally, stricter border control measures could significantly compress the potential labor supply in the U.S., further driving up wage growth. The already severe wage inflation spiral in the U.S. could show signs of further intensification. We expect the Fed to lower interest rates up to two times and more than 20bpsby mid-2025, but it may not be able to implement further cuts in the second half of the year. Meanwhile, non-U.S. developed economies are struggling with weak domestic demand and limited fiscal expansion, which will likely widen the gap with the U.S. in terms of economic growth and inflation in 2025. The European Central Bank may accelerate rate cuts, pushing the U.S. dollar index higher in 2025, which, combined with aggressive U.S. tariff proposals, could create new depreciation pressure on major non-U.S. currencies.
【Anchor】OK, thank you. That's all for this episode. In the next episode, we will look ahead to the Hong Kong economy, as well as the performance of the property and stock markets. Remember to follow us on YouTube or download our APP. I'm Yunfei Zhang, thanks for watching, and see you next time.
Anchor: Laura Cheung | Edited: Kelly Yang, Laura Cheung | Translate: Kato Ip | Proofread: Chris Liu
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