China’s economy is expected to grow by about 5% this year

China’s economy is expected to grow by about 5 per cent this year, the deputy director of the country’s central financial and economic affairs commission said on Saturday.

The world’s second-largest economy is expected to contribute close to 30 per cent of global growth, Han Wenxiu told an economic conference.

Han, who is also a senior official in the ruling Communist Party, said there was a need to boost consumption and view domestic demand expansion as a long-term strategic move that would become the main driving force for economic growth.

China pledged on Thursday to issue more debt and loosen monetary policy to maintain a stable economic growth rate, bracing for more trade tensions with the US as Donald Trump returns to the White House.

Government advisers have recommended that Beijing keep its growth target of around 5 per cent for next year, Reuters reported last month. But while the stock market anticipates a revival in China’s flagging consumption, bond investors are betting the economy will continue to struggle.

Han said a more active fiscal policy and moderately loose monetary policy would help China respond better to unstable and uncertain factors in the economy, and provide strong support for achieving annual targets.

China’s foreign exchange reserves likely remained above $3.2 trillion this year while employment and prices are expected to remain stable, Han said.

Meanwhile new bank lending in China rose by far less than expected in November, highlighting weak credit demand in the world’s second-largest economy as policymakers pledge to roll out more stimulus measures.

Chinese banks extended 580 billion yuan ($79.72 billion) in new yuan loans in November, up from October but missing analysts’ forecast as the central bank steps up support for the economy.

Analysts polled by Reuters had predicted new yuan loans would rise to 990 billion yuan last month, from 500 billion yuan in October and against 1.09 trillion yuan a year earlier.

“With policymakers planning a larger budget deficit next year, strong government bond issuance will continue to prop up credit growth over the coming quarters,” Capital Economics said in a note. “But we don’t envisage much of a pick-up in private sector credit demand.” The People’s Bank of China (PBOC) does not provide monthly breakdowns, but Reuters calculated the November figures based on the bank’s Jan-Nov data on Friday, compared with the Jan-Oct figure. The PBOC said new yuan loans totalled 17.1 trillion yuan for the first 11 months of the year, versus 21.58 trillion yuan a year earlier.

Household loans, including mortgages, rose to 270 billion yuan in November from 160 billion yuan in October, while corporate loans rose to 250 billion yuan from 130 billion yuan, according to Reuters calculations based on central bank data. China’s leaders, at the annual agenda-setting Central Economic Work Conference that concluded on Thursday, pledged to increase the budget deficit and cut interest rates and banks’ reserve ratios to counter the impact of expected US trade tariffs on next year’s economic growth.

Earlier this week, the Politburo promised to switch to an “appropriately loose” monetary policy stance. Reuters reported last month that government advisers recommended that Beijing keep its growth target of around 5 per cent unchanged next year.

China’s economy has struggled this year, prompting policymakers to act in September, with the central bank unveiling its most aggressive monetary easing since the pandemic, cutting interest rates and injecting 1 trillion yuan into the financial system, among other steps.

The government launched a $1.4 trillion debt package last month to ease local government balance sheets and unveiled tax incentives on home and land transactions to spur demand and ease the financial burden on developers.

China may just be able to reach its growth target of around 5 per cent this year, but maintaining that pace next year would be a difficult task as higher US tariffs loom.

Analysts at UBS expect the PBOC to cut its key policy rate by 30-40 basis points in 2025 and another 20-30bp in 2026, which could help lead to more cuts in loan prime rate - the benchmark lending rate - and mortgage rates.

Broad M2 money supply grew 7.1 per cent in November from a year earlier, central bank data showed, below analysts’ 7.5 per cent forecast in the Reuters poll. In October, M2 grew 7.5 per cent.

The narrower M1 money supply fell 3.7 per cent in November from a year earlier, moderating from a 6.1 per cent drop in October.

Outstanding yuan loans grew 7.7 per cent in November from a year earlier. Analysts had expected 7.9 per cent growth, slower than the 8.0 per cent recorded in October.