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Chinese President Xi Jinping recently presided over a significant meeting of the Politburo, where measures aimed at supporting struggling businesses were discussed amidst increasing external pressures. This cabinet meeting, held on March 5, 2025, is particularly timely given the rising tensions between China and the United States, which have intensified due to reciprocal tariff increases exceeding 100% this month. With these developments, major financial institutions have adjusted their GDP forecasts for China, even as the nation continues its pursuit of a growth target of around 5% set in March.
The readout from the meeting indicated a commitment to implementing “multiple measures to help businesses in difficulty,” including financial assistance. Moreover, discussions stressed the necessity of a “timely reduction” in both interest rates and the reserve requirement ratio that stipulates the cash reserves banks must maintain.
According to Zong Liang, the chief researcher at the Bank of China, policymakers are remaining steadfast in their previous approaches but are signaling a readiness for targeted actions. In view of the trade challenges, he anticipates that more research will be conducted on specific sectors to formulate appropriate support mechanisms.
In a notable shift, China has raised its deficit target to 4% of GDP, suggesting that fiscal policy flexibility is on the horizon. Finance Minister Lan Fo’an previously stated that there is sufficient leeway for policy intervention if required.
As U.S. trade tensions escalate, various local governments and prominent companies in China have begun initiatives aimed at helping exporters pivot to the domestic market for better sales opportunities.
The Politburo’s meeting outcomes also highlighted an intention to enhance the economic welfare of middle and lower-income groups and stimulate consumption in services. Furthermore, emphasis was placed on advancing technological innovation, especially focusing on artificial intelligence integration.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, remarked that the press release indicates the government is prepared to enact new policies in response to economic disruptions caused by external factors. However, Zhang also conveyed that the Chinese authorities appear cautious about instigating substantial stimulus measures at this moment, preferring to take the time necessary to carefully assess the situation.
Policy Coordination
The immediate market reactions to the meeting were moderate, with the CSI 300 index briefly declining and Hong Kong’s Hang Seng Index seeing a reduction in its gains following the release of the meeting’s statements.
The Politburo, the high-level executive committee of the Communist Party, typically outlines overarching policy guidance. This recent gathering reiterated previously established strategies by the State Council and government ministries, which serves to highlight a concerted effort at the highest levels of governance, according to Bruce Pang, an adjunct associate professor at CUHK Business School.
While the outcomes of the Politburo meeting were expected and did not present groundbreaking revelations, they equip policymakers with necessary tools to manage external uncertainties effectively. Pang anticipates that a forthcoming law aimed at bolstering the private sector will contribute positively to the business climate in China.
In the coming days, the standing committee of China’s National People’s Congress will convene to review new legislation intended to support private enterprises, reflecting the ongoing strategic focus on economic resilience.
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