China is set to implement significant monetary and fiscal changes in 2025, including a substantial increase in treasury bond funding and an expected interest rate cut, as policymakers move to shore up the world's second-largest economy.

The National Development and Reform Commission (NDRC) announced that China will dramatically increase funding from ultra-long treasury bonds to support consumer subsidies and business investment. Yuan Da, deputy secretary-general of NDRC, confirmed that "the size of ultra-long special government bond funds will be sharply increased this year to intensify and expand the implementation of the two new initiatives."

These initiatives include a consumer subsidy programme for trading in old durable goods and a scheme supporting business equipment upgrades. Additionally, households will receive subsidies for purchasing digital products such as mobile phones, tablet computers, and smart watches.

In a significant shift, the People's Bank of China indicated it would likely cut interest rates from the current 1.5 per cent "at an appropriate time" in 2025. The central bank is also planning a historic overhaul of its monetary policy framework to align more closely with Western central banking practices.

The bank stated it would "pay more attention to the role of interest rate control, and improve the formation and transmission of market-oriented interest rates," marking a move away from its traditional focus on quantitative lending targets.

Sources report that authorities have agreed to issue 3 trillion yuan in special treasury bonds for 2025, marking the highest issuance on record. The government has already approved projects worth 100 billion yuan under its major initiatives programme for the coming year, according to Zhao Chenxin, vice head of the state planner.

These policy changes come as China grapples with multiple economic challenges, including a property sector crisis, high local government debt, and weak consumer demand. Despite these headwinds, officials remain optimistic about the country's economic prospects.

"We are fully confident of driving continued economic recovery this year," Yuan said, adding that China maintains ample policy space to support growth.

---