Nyheter
China Growth Picks up as Stimulus Takes Hold
China Growth Picks up as Stimulus Takes Hold. This publication is a new regular report focusing on macro developments in China relevant to investors across asset classes and markets.
- China steps up monetary and fiscal stimulus, marking a key policy turning point
- The People’s Bank of China (PBoC) cuts reserve ratios for small and rural banks
- Data releases over the past months indicate stimulus policies are starting to have an impact
- Structural reform remains high on the policy agenda, but growth takes precedenc
China steps up monetary and fiscal stimulus, marking a key policy turning point. Over the past month a number of fiscal and monetary policy initiatives and speeches by senior leaders has made it clear that China will “do whatever it takes” to ensure growth stays in the 7%-8% range, with the upper half of the range preferred. We believe growth bottomed in Q1, with a relatively robust rebound in store in H2, marking a key economic turning point after three years of slowdown.
The People’s Bank of China (PBoC) cuts reserve ratios for small and rural banks, adding monetary stimulus to the fiscal stimulus already announced earlier this year. While in of themselves the cuts are unlikely to be highly stimulative, they signal the government is serious about improving credit conditions for certain segments of the economy, including rural areas and small enterprises. Remarks by PBOC officials indicate that targeted credit easing is now being encouraged.
Data releases over the past months indicate stimulus policies are starting to have an impact. Industrial production, retail sales, loan growth, fixed asset investment, exports and inflation have all picked up over the past two months, and we anticipate further gains in H2 2014.
Structural reform remains high on the policy agenda, but growth takes precedence. The clampdown on corruption and non-productive lending, the move to a true market-driven economy, improvement in environmental standards, and improved land rights for rural citizens remain key goals of the government. However, maintaining strong employment growth and social stability will take priority if there are short term conflicts between the two agendas – as there have been recently.
STIMULUS MARKS POLICY TURNING POINT
We expect China economic growth to pick up in the second half of the year, supported by loosening fiscal and monetary policy as well as improving external demand. China’s Premier has made it clear that he will do ”whatever it takes” (to paraphrase Mario Draghi) in order to maintain economic growth close to 7.5%, a level considered necessary to maintain full employment and social stability. In addition to the fiscal loosening announced earlier this year, monetary easing has now started earlier than most analysts expected.
Reserve requirement rate cut
The People’s Bank of China (PBoC) cut the reserve requirement ratio for small and rural banks by 50bps, effective June 16th. The announced cuts are in addition to the 50-200bps reserve ratio cuts for rural banks in April 2014. The cuts have been limited and carefully targeted, leaving plenty of dry-powder for deeper and broader cuts down the line. The cuts are also in line with the longer term moves to liberalise the banking system through gradual deposit interest rate liberalisation and bank consolidation.
Estimates of how much new liquidity the moves will inject vary from 95 billion Yuan to 50 billion Yuan. The change in the reserve ratio will apply to approximately two thirds of city commercial banks, 80% of non-county level rural commercial banks and 90% of non-county level rural cooperative banks.
Monetary and credit growth appears to be responding positvely to the cuts in the reserve ratios for rural banks earlier this year.
Potential changes to the loan-to-deposit ratio
The Deputy Chairman of China’s banking regulator, Wang Zhaoxin, said on 6 June that the regulator is considering adjusting the calculation of loan-to-deposit ratios (LDR). Many banks have hit the 75% cap and therefore their capacity to lend is constrained. It is expected that over the medium term, China will move to a liquidity-at-risk framework, eliminating the LDR requirement. But that would require a change in the Commercial Bank Law. For now, it is likely the changes will entail excluding certain types of loans from the calculation to allow banks to lend more freely, especially to small-to-medium sized companies.
Two-way currency risk maintained
The PBoC allowed the renminbi appreciate by 0.6% in the first half of June, defying those who thought the country had switched to currency depreciation strategy. The authorities have been at pains to introduce two-way currency risk to encourage better market discipline and prepare the country for further financial and currency market liberalisation. In our view, with the balance of payments still in regular surplus, reserves continuing to accumulate and the government actively encouraging a shifting emphasis from external to domestic-led growth and a continued move up the value-added chain, the renminbi will maintain a medium-term appreciation trend.
Local government financing reform being eased in
Following abuses in the early 90’s, local governments have been largely excluded from issuing bonds, with bank loans the main source of financing. However, reform is now being introduced, with the government stepping up its efforts to develop the municipal bond markets (with encouragement from the IMF) in order to increase transparency and reduce the growing reliance on hard to measure and control “shadow-banking” financing vehicles.
While the full development of a municipal bond market is some way off, the Ministry of Finance has been issuing bonds on behalf of local governments and some local governments are able to issue bonds within a quota. A total of 10 local governments can issue bonds with Beijing, Jiangxi, Ningxia and Qingdao being added to the list last month. The Ministry of Finance last week introduced the requirement that local governments must obtain credit ratings to issue bonds in a bid to bolster credit risk management. Last week the Ministry auctioned 51.6bn Yuan (US$8.3bn) worth of 3 and 5 year local government bonds.
Local government’s role in achieving targets reaffirmed
Premier Li Keqiang pressed local leaders last month to help the economy achieve its annual growth target. Li reminded local leaders of their “inescapable responsibility” to achieve this year’s economic targets and stressed that “no delay in action is allowed”.
Real economy responding to fiscal stimulus
Last month the State Council announced it will boost public investment in railway, highway, waterways, and aviation-network construction in the Yangtze River basin and cut some utility companies’ taxes by a total of about 24bn Yuan (US$3.9bn) a year. That will be positive for growth this year.
The real economy is already beginning to respond to the stimulus put in place earlier this year with industrial production, retail sales, loan growth, fixed asset investment, exports and inflation all rising and coming in higher than consensus expectations this month.
Investor sentiment is starting to improve
Recent actions and statements by key government officials and policy-makers make it clear that China will continue to pursue its reform agenda – at a more moderate pace if necessary – while loosening fiscal and monetary policy in order to reverse the three year economic slowdown. With economic data becoming more consistently positive and the government’s easing stance becoming more transparent, the China’s local A share market has started to trend higher. As one of the world’s cheapest equity markets, we believe that if the current policy stance continues and growth rebounds in H2, China domestic equity markets are in a position to outperform.
Important Information
This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the ”FCA”).
2024 was a landmark year for bitcoin, solidifying its role as a fully institutionalised asset class.
Institutional inflows into physical bitcoin exchange-traded products (ETPs) reached nearly $35 billion globally, signalling a major shift in how traditional investors view crypto. As bitcoin continued to enhance portfolios’ risk-return profiles, more institutional investors followed suit, reshaping the financial landscape.
Looking ahead, 2025 promises to bring exciting developments across the crypto ecosystem. Here are the top five crypto trends to watch.
Fear of being left behind
The era of bitcoin as a niche investment is over. Institutional adoption is creating a ripple effect, forcing hesitant players to reconsider. Portfolios with bitcoin allocations are consistently outperforming those without, highlighting its growing importance.
Figure 1: Bitcoin in a multi-asset portfolio
| 60/40 Global Portfolio | 1% Bitcoin Portfolio | 3% Bitcoin Portfolio | 5% Bitcoin Portfolio | 10% Bitcoin Portfolio | MSCI AC World | Bloomberg Multiverse | Bitcoin | |
| Annualised Return | 5.77% | 6.46% | 7.83% | 9.20% | 12.57% | 9.07% | 0.56% | 56.24% |
| Volatility | 8.79% | 8.86% | 9.14% | 9.62% | 11.42% | 13.94% | 5.05% | 67.28% |
| Sharpe Ratio | 0.48 | 0.55 | 0.68 | 0.79 | 0.96 | 0.54 | -0.20 | 0.81 |
| Information Ratio | 1.01 | 1.01 | 1.01 | 1.00 | ||||
| Beta | 70% | 71% | 73% | 75% | 81% | 100% | 24% | 181% |
Source: Bloomberg, WisdomTree. From 31 December 2013 to 30 November 2024. In USD. Based on daily returns. The 60/40 Global Portfolio is composed of 60% MSCI All Country World and 40% Bloomberg Multiverse. You cannot invest directly in an index. Historical performance is not an indication of future performance and any investment may go down in value.
With bitcoin’s ability to noticeably improve portfolios’ risk-return profiles, asset managers face a clear choice: integrate bitcoin into multi-asset portfolios or risk falling behind in a rapidly evolving financial landscape. In 2025, expect the competition to heat up as clients demand exposure to this powerhouse cryptocurrency.
Expanding crypto investment options
In 2024, regulatory breakthroughs opened the doors for physical bitcoin and ether ETPs in key developed markets. This marked a critical step towards making cryptocurrencies mainstream, providing seamless access to institutional and retail investors alike.
Figure 2: Global physical crypto ETP assets under management (AUM) and 2024 net flows
Source: Bloomberg, WisdomTree. 02 January 2025. Historical performance is not an indication of future performance and any investment may go down in value.
In 2025, this momentum is expected to accelerate as the crypto regulatory environment becomes more friendly in the United States and as key developed markets follow Europe’s lead and approve ETPs for altcoins such as Solana and XRP. With their clear utility and growing adoption, these altcoins are strong candidates for institutional investment vehicles.
This next wave of altcoin ETPs will expand the diversity of crypto investment opportunities and further integrate cryptocurrencies into the global financial system.
The maturing of Ethereum’s layer-2 ecosystem
Ethereum’s role as the backbone of decentralised finance (DeFi), non-fungible tokens (NFTs), and Web3 is unmatched, but its scalability challenges remain a hurdle. Layer-2 solutions—technologies such as Arbitrum and Optimism—are transforming Ethereum’s scalability and usability by enabling faster, cheaper transactions.
In 2025, Ethereum’s recent upgrades, such as Proto-Danksharding (introduced in the ‘Dencun’ upgrade), will drive layer-2 adoption even further. Innovations like Visa’s layer-2 payment platform leveraging Ethereum for instant cross-border transactions will underscore the platform’s evolution.
Expect Ethereum’s layer-2 ecosystem to power real-world use cases ranging from tokenized assets to decentralised gaming, positioning it as the infrastructure of a truly scalable digital economy.
Stablecoins: bridging finance and blockchain
Stablecoins are becoming indispensable to the global financial system, offering the stability of traditional assets with the efficiency of blockchain. Platforms such as Ethereum dominate the stablecoin landscape, hosting stablecoin giants Tether (USDT) and USD Coin (USDC), which facilitate billions in daily transactions.
Figure 3: Key stablecoin chains
Source: Artemis Terminal, WisdomTree. 05 January 2025. Historical performance is not an indication of future performance and any investment may go down in value.
As we move into 2025, stablecoins will increasingly interact with blockchain ecosystems such as Solana and XRP. Solana’s high-speed, low-cost infrastructure makes it ideal for stablecoin payments and remittances, while XRP Ledger’s focus on cross-border efficiency positions it as a leader in global settlements. With institutional adoption rising and DeFi applications booming, stablecoins will serve as the backbone of a seamless, interconnected financial ecosystem.
Tokenization: redefining ownership and revolutionising finance
Tokenization is set to redefine how we think about ownership and value. By converting tangible assets like real estate, commodities, stocks, and art into digital tokens, tokenization breaks down barriers to entry and creates unprecedented liquidity.
In 2025, tokenization will expand dramatically, empowering investors to own fractions of high-value assets. Platforms such as Paxos Gold and AspenCoin are already showcasing how tokenization can revolutionize markets for gold and luxury real estate. The integration of tokenized assets into DeFi will unlock new financial opportunities, such as using tokenized real estate as collateral for loans. As tokenization matures, it will transform industries ranging from private equity to venture capital, creating a more inclusive and efficient financial system.
For the avoidance of any doubt, tokenization complements crypto by expanding the use cases of blockchain to include real-world applications.
Looking ahead
2025 is set to be a defining year for crypto, as innovation, regulation, and adoption converge. Whether it is bitcoin cementing its position as a portfolio staple, Ethereum scaling for mainstream use, or tokenization unlocking liquidity in untapped markets, the crypto ecosystem is poised for explosive growth. For investors and institutions alike, the opportunities have never been clearer or more compelling.
This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
FLXA ETF investerar enligt katolska principer
5 crypto trends to watch in 2025
FGLR ETF gör hållbara investeringar i hela världen
Trump’s inauguration day, BTC all-time high and the US election bullish effect
AXA IM antar SDR-märkningar för tre aktiefonder i Storbritannien
De mest eftersökta ETFerna i december 2024
Post-election rally cools at year end
De bästa ETFerna för värdeaktier
BlackRock slår rekord med lanseringen av bitcoin ETF
Hector McNeil kommenterar Trumps krav på Natos försvarsutgifter
-
Nyheter3 veckor sedanDe mest eftersökta ETFerna i december 2024
-
Nyheter2 veckor sedanPost-election rally cools at year end
-
Nyheter3 veckor sedanDe bästa ETFerna för värdeaktier
-
Nyheter3 veckor sedanBlackRock slår rekord med lanseringen av bitcoin ETF
-
Nyheter3 veckor sedanHector McNeil kommenterar Trumps krav på Natos försvarsutgifter
-
Nyheter3 veckor sedanBuffertstrategin på Nasdaq-100 med december 2024/2025 som ny målperiod
-
Nyheter4 veckor sedanValour PYTH SEK spårar priset på kryptovalutan PYTH
-
Nyheter1 vecka sedanHANetfs Tom Bailey om utsikterna för koppar och uran
