China’s top decision-making body, the Politburo, announced on Friday its commitment to “moderately” strengthen fiscal policy to propel economic recovery. Chaired by President Xi Jinping, the meeting focused on economic strategies for 2024, emphasizing the continuation of “proactive” fiscal policies and “prudent” monetary policies to invigorate domestic demand.

The Politburo pledged to enhance “economic vitality” effectively, aiming to prevent and mitigate risks while consolidating and reinforcing the upward trajectory of China’s recovering economy, currently the world’s second-largest.

The specific measures outlined by the Politburo include a moderate strengthening of proactive fiscal policy to enhance its quality and efficiency. Simultaneously, the prudent monetary policy is expected to be flexible, appropriate, precise, and effective.

China’s economy has faced headwinds this year, with diminished demand for its goods amid a slowdown in global growth. Various factors, such as challenges in the property market, sluggish global economic conditions, and geopolitical tensions, have contributed to a loss of momentum in China’s economic recovery.

Despite a surprise uptick in exports, concerns persist about the effectiveness of further fiscal stimulus in the face of weak external demand. HSBC’s chief Asia economist, Frederic Neumann, cautioned that the Chinese economy still faces challenges and has a “steep hill to climb.”

While November’s exports in U.S. dollar terms exceeded expectations by rising 0.5% year-on-year, analysts had anticipated a decline. Imports, however, fell by 0.6% over the same period, below the consensus forecast of a 3.3% increase.

Economists emphasize that China’s policy support should not solely focus on the supply side and should address weak external demand for sustainable results.

As China navigates these challenges, the Politburo’s commitment to moderate fiscal strengthening reflects the government’s proactive stance in sustaining economic recovery and fostering resilience in the face of global economic uncertainties.