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

Compiled from Huxiu Miaotou.

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

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

On August 30, 2024, the central bank announced for the first time in its history that it would buy government bonds in the secondary market. This was a major breakthrough in expanding asset purchases and signaled a new stage in how monetary supply and policy orientation are conducted.

The central bank is the lender of last resort at the macro level and the final backstop for the economy in any system. When the economy faces difficulty, the central bank can provide strong support to the economy and markets by purchasing assets in key areas. This measure can not only directly ease funding pressure in targeted sectors and prevent crises, but also increase base money supply, stimulate the economy, and bolster market confidence.

Globally, buying government bonds is the most common way for central banks to provide easing 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 currently holds over $4 trillion in U.S. Treasuries, peaking near $5.8 trillion, accounting for more than 60% of its total assets.

By comparison, China historically avoided using 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 for the government's increased leverage and the core reason we repeatedly emphasize “don’t worry about where the money comes from.”

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

2. For the first time at the central level, “stabilize the stock market” was proposed and monetary policy tools were created to support equities

At the Politburo meeting in December this year, “stabilize the stock market” appeared for the first time at the highest level of central meetings. This indicates the capital market’s significantly elevated status within macro policy; the bear market had touched the 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 established the “stock repurchase reinforcement re-lending” and “swap facility” programs to provide liquidity support for listed companies’ buybacks and for non-bank institutions. This was the central bank’s first use of innovative tools to provide funding support to the stock market.

The policy not only stabilized market sentiment but also brought direct capital inflows into the A-share market, helping push valuations higher. At the same time, implementing the swap facility reduced liquidity risk for financial institutions and strengthened market confidence.

3. Normalized issuance of special sovereign bonds for the first time

2024 was the first year of normalized issuance of special treasury bonds. To date, more than ¥1 trillion has been issued in total. This marks a shift toward a more proactive, expansionary fiscal policy stance.

The purpose of regular issuance of special sovereign bonds is to provide long-term, stable financing for local government infrastructure projects, fill local debt gaps, and promote the implementation of green transition and technological 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 stock-to-bond ratio dropped below 27% for the first time — all historical lows. These changes reflect the combined long-term forces of population aging, private-sector deleveraging, and monetary easing.

A low-rate environment reduces financing costs for companies and further stimulates homebuying demand among households. Together, these factors supported the steady recovery of the domestic economy.

5. Stock-to-bond ratio reached a historic low

In 2024, the stock-to-bond ratio stayed below 30% for the year and briefly fell to 21.75% near year-end, setting a record low. This reflects extreme market aversion to equities and a marked preference for bonds.

This phenomenon also prompted institutional investors to reassess asset allocation strategies and begin gradually increasing equity exposure, laying groundwork for a market rebound in 2025.

6. Gold and Bitcoin reached record highs

In 2024, international gold prices broke $2,800/oz, domestic gold prices exceeded ¥630/gram, and Bitcoin surpassed $100,000. Gold became one of the best-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’ strong interest in haven assets.

7. First-tier cities relaxed purchase restrictions

In 2024, China’s real estate market saw its loosest year. First-tier city Guangzhou fully lifted purchase restrictions, and Beijing, Shanghai and Shenzhen eased measures regionally. This marked a significant change in the real estate supply-demand relationship.

The direct result of policy easing was a rapid rebound in transaction volumes; in some hot areas housing prices began to stabilize or even rise, injecting new vitality into a long-dormant property market.

8. A historic rebound in the A-share market

Although the full-year gains were not large, the broad market rebound in September–October 2024 was impressive: broad-based indices hit multiple daily limit-ups, single-day turnover reached ¥3.45 trillion, and annual trading volume reached ¥258 trillion.

This rebound was driven by the establishment of a policy bottom, improved liquidity, and a repair of corporate earnings expectations. Improved market sentiment also laid a foundation for the long-term healthy development of capital markets going forward.