By Kevin Yao and Ellen Zhang

BEIJING (Reuters) – China will adopt an "appropriately loose" monetary policy next year for the first time in 14 years, alongside a proactive fiscal policy to spur economic growth, the Politburo announced on Monday.

China plans to implement "unconventional" counter-cyclical adjustments, expanding domestic demand and boosting consumption, as reported by state media Xinhua citing top Communist Party meeting insights.

The announcement precedes the annual Central Economic Work Conference, which sets key targets and policy intentions for the upcoming year.

Following the Politburo meeting, stocks surged and government bonds rallied, with Hong Kong's Hang Seng index rising by 2.8% to its highest level in a month.

In 2025, authorities must uphold "the principle of pursuing progress while maintaining stability," as stated by Xinhua.

"A more proactive fiscal policy and an appropriately loose monetary policy must be implemented, enhancing and refining the policy toolkit, strengthening extraordinary counter-cyclical adjustments," the readout specified.

The targeting of the housing and stock markets for stabilization was highlighted, albeit without further details.

POLICY STANCE BEING EASED

The newly articulated monetary policy signifies the first easing since late 2010, as per official statements from the Politburo meetings.

Xing Zhaopeng, ANZ's senior China strategist, noted, "This points to strong fiscal stimulus, big rate cuts, and asset purchasing in 2025. The policy remarks illustrate confidence against Trump's tariff threats."

China's economy has faced challenges this year, prompting policymakers to take action in September by unveiling aggressive monetary easings, including interest rate cuts and injecting 1 trillion yuan ($140 billion) into the financial system.

China may meet its growth target of around 5% this year, but sustaining this rate in 2025, especially with U.S. President-elect Donald Trump threatening tariffs, will be challenging.

The central bank has outlined various policy stances – "loose", "appropriately loose", "prudent", "appropriately tight", and "tight" – with flexibility on either side.

An "appropriately loose" monetary policy was adopted post the 2008 global financial crisis before shifting to a "prudent" approach in late 2010.

In November, China announced a 10 trillion yuan ($1.40 trillion) debt package to alleviate local government financing issues and stabilize economic growth, focusing on repairing municipal balance sheets long-term rather than direct monetary injections.

President Xi Jinping, during a December 6 symposium, emphasized the need for comprehensive preparations to achieve economic targets for 2025 and acknowledged numerous challenges.

TRUMP TARIFFS LOOM

This year, China's economy has shown an over-reliance on manufacturing and exports, while household demand remained weak due to a severe property market crisis affecting consumer wealth. Most governmental stimulus has been directed to producers and infrastructure.

Government advisers recommend maintaining next year’s growth target while advocating stronger fiscal stimulus to counter the impacts of anticipated U.S. tariffs and stave off deflationary pressures.

Trump’s tariff threats have unsettled China's industrial sector, reliant on over $400 billion in annual sales to the United States.

Finance Minister Lan Foan acknowledged upcoming stimulus measures without specifics.

Economists are urging Beijing to promote consumer-focused policies and enhance financial assistance for low-income citizens while implementing tax, welfare, and other intended reforms to resolve structural imbalances.

However, so far, government initiatives have primarily concentrated on upgrading the export-oriented manufacturing sector, achieving notable successes in sectors like electric vehicles, solar energy, and batteries, which has led to pushback from key trade partners.