China's Economic Shift: Loosening Monetary Policy Amid Tariff Tensions

China's top leaders have announced plans to loosen monetary policy to address the slowing economy while challenging the threat of higher tariffs on Chinese exports, which Premier Li Qiang says undermine global growth. This move follows the ruling Communist Party's Politburo meeting where it was resolved to implement 'more active fiscal policies and moderately loose monetary policies.'

The shift from 14 years of 'prudent' monetary policy to a more lenient approach spurred investor optimism, driving the Hang Seng index up by 2.8%. Stephen Innes from SPI Asset Management highlighted the recalibration as a strategy to soften the impact of expected economic shocks from tariffs. Meanwhile, longstanding market promises were reiterated, though the clearer support policy stance from September remains intact, according to Julian Evans-Pritchard.

With economic growth falling short of the 5% target and consumer inflation at a moderate 0.2%, China promises a 'combination punch' of government spending and easier credit to boost consumption. The Politburo vows to improve public welfare, as youth unemployment remains high, while Premier Li indirectly criticized nations imposing high tariffs, notably on advanced technology exports, hinting at tensions with the US.

(With inputs from agencies.)