A senior adviser to the People’s Bank of China (PBOC), Huang Yiping, announced that China is preparing to introduce more fiscal and monetary stimulus measures to counter the nation’s economic slowdown and address persistent deflationary pressures. The economic outlook is clouded by structural constraints, a prolonged property sector downturn, weak household confidence, and new external disruptions, including escalating US tariffs. Although China’s GDP recently expanded by a stronger-than-expected 1.1% quarter-on-quarter in Q3 2025, officials recognize that investment and consumption remain sluggish, necessitating further policy support to maintain the official 5% annual growth target.
The planned stimulus efforts will focus strategically on the demand side of the economy. This involves accelerating fiscal spending and implementing measures to directly boost household consumption, moving away from a long-standing policy of prioritizing investment-led growth. Specific tools include expanding popular trade-in programs for durables like cars and appliances and providing interest subsidies for consumer and small business loans. Targeted liquidity injections and sovereign bond issuances will finance these efforts, particularly for infrastructure investment in key sectors and regions, as well as high-tech innovation.From a monetary perspective, the PBOC has signaled plans to keep policy “moderately loose” and cut policy rates “at an appropriate time” to encourage lending and lift expectations for stronger nominal growth. However, analysts caution that the fiscal deficit-to-GDP ratio will likely rise above the 3% ceiling in 2025, and long-term challenges, such as industrial overcapacity and low confidence among the private sector, will persist, requiring sustained structural reforms alongside short-term stimulus measures.
