China vows to ready emergency plans, signals calm amid trade war

Business Times

25-04-2025

[BEIJING] China vowed to 'fully prepare' emergency plans to ward against increasing external shocks, taking a patient approach in defending growth as a deepening trade war with US President Donald Trump piles pressure on the world's No 2 economy.
The decision-making Politburo led by President Xi Jinping also pledged on Friday (Apr 25) to set up new monetary tools and policy financing instruments to boost technology, consumption and trade, according to the official Xinhua News Agency. Such steps could allow for faster deployment of low-cost credit for investment in targeted areas.
'We must keep improving the policy toolbox to stabilise employment and the economy, and launch measures already planned at an earlier date,' top leaders said, according to the readout. They also pledged to 'go all out to consolidate the fundamentals of economic development and social stability.'
Beijing is signalling it is in no rush to be aggressive in expanding economic stimulus just a month after unveiling measures including a commitment to run a record-high budget deficit. China's stronger-than-expected growth in the first quarter bought more time for the government to consider new steps.
'The stimulus hope is still alive as it vowed to add new incremental policies and enhance extraordinary countercyclical adjustments,' said Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group. 'But the leaders clearly adopt a wait and see approach.'
Policymakers reiterated China should free more cash for banks 'when needed,' and carefully 'pick the timing' for rate cuts.
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Futures on 30-year government bonds jumped the most since Apr 9 after the Politburo's comments on timely rate and reserve requirement ratio cuts. The yield for 10-year notes stayed little changed and the offshore yuan was flat. China's onshore stock benchmark CSI 300 Index closed 0.1 per cent higher after an advance of as much as 0.5 per cent.
'China's Politburo on Friday sent a calmer message than the market expected – yes, emergency trade-war plans are being prepared to support the economy, but no, it's not an all-in moment,' said Bloomberg Economics economists Eric Zhu and David Qu. 'The meeting readout suggests the focus remains on executing the stimulus plan approved in early March – with faster delivery – and sticking to medium and long-term reform plans.'
Beijing has typically dispensed support only when warranted to protect the nation's annual growth goal. While expansion in the first quarter came in above the government's target of about 5 per cent for this year, more stimulus is still needed as the economy could lose momentum significantly from April, when Trump's punitive reciprocal tariffs kicked in.
The authorities may unleash more economic aid when they get a better idea of the prospects of trade negotiations with the US, with the next huddle of the Politburo in three months' time a window to watch, according to Jacqueline Rong, chief China economist at BNP Paribas.
'Policymakers will likely wait until the July Politburo meeting to unveil new stimulus,' she said. 'Because by then two things will become clearer: how trade talks with the US will go and how the economy is faring with most of the policies approved at the Two Sessions having been rolled out,' she said, referring to the annual legislative session.
The Xinhua report came one day after Beijing dismissed claims from the US that there were talks on reaching a trade deal. China's Commerce Ministry also re-upped its demand this week for Washington to revoke all unilateral tariffs, showing it's in no rush to start negotiations despite Trump's suggestion he could substantially lower levies in a deal.
Foreign Ministry spokesman Guo Jiakun reiterated on Friday that 'China and the US are not having any consultation or negotiation on tariffs.' Speaking at a daily press briefing, he said 'the US should not mislead the public.'
Some of the pledges from the Politburo readout have been previously floated by senior officials, such as a 'sci-tech board' in the bond market and relending facilities for elderly care, as well boosting service consumption. The meeting appears to be giving the tasks greater urgency after Trump hiked levies on most Chinese goods to as high as 145 per cent.
The 24-member Politburo typically uses its April huddle to discuss economic issues. While the readouts rarely reveal numerical targets, the vaguely worded statements can give important clues on policy shifts. This month's meeting is being closely watched for any signs of Beijing rolling out stimulus.
'We must strengthen the bottom-line thinking and fully prepare contingency plans to concrete do well the economic work,' top leader said in the meeting readout, adding that more work needed to be done to allow the economy to keep recovering. BLOOMBERG