As we approach the end of 2024, many are left contemplating the achievements and challenges of the past yearSome may find closure in a sense of fulfillment, while others might feel a lingering sense of incompletenessYet, hope is on the horizon, particularly in light of recent economic policies enacted both domestically within China and on the global stageMeasures such as a moderately relaxed monetary policy, a more proactive fiscal policy, and the United States Federal Reserve's recent decision to cut interest rates for the third time this year signal a potentially positive outlook for 2025.

What do these more optimistic signals entail? Are we witnessing a rebound in housing prices? Is there a possibility of a stable and improving stock market? Could we expect an inflationary surge following a lengthy period of deflation? Or will we observe improvements in employment conditions along with a more fluid movement of social capital?

One of the most pressing questions is whether the current deflationary state will soon change

For instance, initiatives aimed at stimulating consumer spending, like appliance trade-in programs, started rolling out by the end of JulyHowever, recent data indicates that in October, China experienced a 0.3% drop in consumer prices, suggesting that deflationary pressures still persist.

This raises a crucial issue: despite significant monetary expansion—with M2 money supply reaching an eye-popping 309.71 trillion yuan by the end of October—the anticipated economic responses such as increased money circulation, rising prices, and inflation remain absentTypically, such an extensive issuance of currency would boost the economy, yet we find ourselves in the grip of deflation instead.

The phenomenon stems largely from the fact that excessive currency is not meaningfully entering the real economyThis disconnect is critical because real-world economic activity significantly influences consumer behavior

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Furthermore, a general loss of confidence in the loan market has compounded these issuesNevertheless, there is reason to believe that these trends will begin to shift positively in 2025.

For starters, during the Central Economic Work Conference on December 12, it was announced that pensions for retirees and basic pensions for urban and rural residents will riseIn addition, initiatives like the doubling of national scholarship opportunities and increases in both the scholarship amounts and financial aid for students have been introducedSuch tangible policies that put money directly into consumers' hands create a win-win scenario for both the government and the populace.

Moreover, the conference on December 9 recommended monetary policy adjustments to be “moderately relaxed” and fiscal policies to be “more proactive.” In essence, this means continuing to issue currency, lower interest rates, and manage debt effectively

Back in early November, the National People's Congress authorized 10 trillion yuan for local debt management, which encompasses hidden debts linked to the improvement of slum housing that are due beyond 2029.

This substantial financial intervention essentially resolves 12 trillion yuan of local government debt, even though it does not directly boost consumer spending or the real estate marketNevertheless, alleviating government debt pressures allows local authorities to invest in new infrastructure and public welfare projects, ultimately enhancing employment opportunities and improving the circulation of social capital, benefiting many citizens.

Furthermore, we should consider the potential impact of the Federal Reserve's decisions on other markets, including China’sOn December 18th, the Fed announced its third interest rate cut this year, prompting a likely influx of foreign capital into the Chinese market

Lowering interest rates aims to stimulate consumer spending and internal demand, driving financial resources away from banks and back into productive investment across the economy—including the housing and stock markets.

Since 2012, bank lending rates have consistently decreased, with current rates hovering around 2% for many major banksIn response to declining net interest margins in commercial banking—from 2.2% to approximately 1.54%—banks are incentivized to lower deposit rates further.

In light of these developments, it is highly plausible that interest rates will continue to fallWhile there have been policies intended to lower existing housing loan rates, the current rates have remained in the 3-4% range, with expectations of dropping to approximately 2.5% in the near futureHowever, considering future increases in housing prices, we must examine demographic trends closely.

China faced a population growth rate of -1.48% in 2023, compounded by an escalating aging population—where the percentage of individuals aged 60 and above increased from 19.8% in 2022 to 21.1% just last year

Additionally, recent statistics from the Ministry of Civil Affairs highlighted that the number of marriages in the first three quarters of this year reached a record low of 4.747 million couples, marking a year-on-year decline of 943,000 pairsGiven the increasing aging population and the decline in birth and marriage rates, it is increasingly challenging for housing prices to correct prevailing market expectations in the short term.

As for the stock market, currently valued at approximately 100 trillion yuan, the capacity for growth is similarly limited due to this high baseThe likelihood of a broad upward trend in all sectors remains low; instead, a cyclical market that rotates between technology stocks and blue-chip investments is more probable.

All things considered, there is a strong possibility that various governmental stimuli will foster a more favorable economic situation by 2025. Those who remain diligent, seizing opportunities as they arise while remaining attentive to social developments and positioning themselves strategically could indeed witness the dawn of a new era, as promised by the favorable clouds on the horizon.