The "First" of 2024 in the Economy and Capital Markets

Compiled from Huxiu Miaotou.

2024 has ended. In the long history of China's economy and capital markets, 2024 was unquestionably an extraordinary year — even a milestone year.

1. The central bank publicly bought government bonds for the first time

On August 30, 2024, the central bank announced for the first time in its history that it would purchase government bonds in the secondary market. This marked an important breakthrough in the central bank's expanded asset purchases and signaled a new stage in liquidity provision and monetary policy orientation.

The central bank is the macro-level lender of last resort and the ultimate safety net in any economy. When the economy faces difficulties, the central bank can provide strong support to the economy and markets by purchasing assets in key areas. This measure can not only directly relieve funding pressure in prioritized sectors and prevent crises, but also increase base money supply, stimulate the economy, and boost market confidence.

Globally, buying government bonds is the most common way for central banks to ease policy and support the real economy. For example, the Bank of Japan currently holds nearly ¥580 trillion in Japanese government bonds, about 80% of its total assets; the Federal Reserve now holds over $4 trillion in U.S. Treasuries, peaking near $5.8 trillion, accounting for more than 60% of its total assets.

By contrast, China has long been reluctant to allow the central bank to finance government debt, but that began to change in August 2024. By November, the central bank had purchased ¥1.1 trillion in government bonds. This is the main source of confidence behind the government's increased leverage and the core reason we repeatedly emphasize 'don't worry about where the money will come from.'

More importantly, the central bank's move sent an important signal: when necessary, the central bank will step in to buy special assets, not limited to government bonds. Globally, besides government bonds, central banks have many other asset options, such as real-estate-related assets (for example, the Fed's large purchases of MBS after the 2008 crisis) and equity-market-related assets (for example, the Bank of Japan's large-scale purchases of equity-linked ETFs since 2010).

2. For the first time at the central level: 'stabilize the stock market' and creation of monetary policy tools to support equities

At the December Politburo meeting this year, 'stabilize the stock market' appeared for the first time at the highest level of central government. This indicates the significantly elevated status of the capital market in macro policy; the bear market hit a policy bottom line and triggered a market-rescue backstop option.

The most important policy was announced at the end of September 2024, when the central bank created the 'stock repurchase increase lending' and 'swap facility' programs to provide liquidity support for listed-company buybacks and non-bank institutions. This was the first time the central bank used innovative tools to provide funding support to the stock market.

The launch of these policies not only stabilized market sentiment, but also brought direct capital inflows into the A-share market, driving a rebound in market valuations. At the same time, implementation of the swap facility reduced liquidity risk for financial institutions and strengthened market confidence.

3. First year of normalized issuance of special government bonds

2024 was the first year of normalized issuance of special government bonds. To date, issuance has exceeded ¥1 trillion. This marks a fiscal policy shift toward a more proactive, expansionary stance.

The purpose of normalized issuance of special government bonds is to provide long-term, stable funding support for local government infrastructure projects, fill local government debt gaps, and advance green transition and technology innovation projects.

4. Interest rates hit historic lows

In 2024, the 10-year government bond yield fell below 2% for the first time, average mortgage rates fell below 3.5% for the first time, and the equity-to-debt ratio fell below 27% for the first time — all historic lows. These changes reflect the combined long-term forces of population aging, private-sector deleveraging, and monetary easing.

A low-interest-rate environment reduced financing costs for companies and further stimulated renewed housing demand among households. These factors together supported a steady domestic economic recovery.

5. Equity-to-debt ratio reached a historic low

In 2024, the equity-to-debt ratio stayed below 30% for the year, falling as low as 21.75% near year-end — a record low. This reflects the market's extreme aversion to equities and strong preference for bonds.

This phenomenon also prompted institutional investors to reassess asset-allocation strategies and gradually increase equity allocations, laying the groundwork for a market rebound in 2025.

6. Gold and Bitcoin hit record highs

In 2024, international gold prices surpassed $2,800/oz, domestic gold prices exceeded ¥630/g, and Bitcoin rose above $100,000. Gold became one of the top-performing global assets for the year.

The simultaneous rise in gold and Bitcoin prices reflects global concerns about inflation and geopolitical risk, and shows investors' heightened focus on safe-haven assets.

7. First-tier cities loosen purchase restrictions

In 2024, China's real estate market experienced its loosest year. Guangzhou fully lifted home-purchase restrictions in first-tier cities, and Beijing, Shanghai, and Shenzhen eased rules in certain areas. This marked a major change in real estate supply-demand dynamics.

The direct result of policy easing was a rapid rebound in transaction volumes, with prices stabilizing or even rising in some popular areas, injecting new momentum into a long-slumping housing market.

8. Historic rebound in the A-share market

Although the full-year gains were modest, the large-cap rebound in September–October 2024 was impressive: broad-based indices hit numerous daily limit-ups, single-day trading volume reached ¥3.45 trillion, and annual trading volume totaled ¥258 trillion.

This rebound benefited from the establishment of a policy bottom, improved liquidity, and a restoration of corporate earnings expectations. At the same time, improved market sentiment laid a foundation for the long-term healthy development of the capital market.