The 2025 Shenzhen International Finance Conference, hosted by Renmin University of China, took place from November 19 to 21 in Shenzhen. Ma Yong, Director of the China Fiscal and Monetary Policy Research Center at Renmin University and Deputy Dean of the National Academy of Financial Research, unveiled the China Financial Conditions Index (CAFI) during the event. Developed under the leadership of Professor Zhuang Yumin, Dean of the School of Finance, and Ma Yong's research team, the index has undergone six years of continuous tracking and validation. It systematically evaluates China's overall financial conditions through six sub-indices covering money, credit, stocks, bonds, foreign exchange, and real estate markets.
CAFI accurately reflects financial cycle dynamics and exhibits significant leading properties over key macroeconomic indicators such as GDP and CPI. Current monitoring indicates that China's financial conditions have gradually moved out of the "cooling" phase, showing initial signs of recovery, though foreign exchange and bond markets remain key constraints.
Based on index analysis, the report forecasts continued accommodative monetary policy and recommends orderly guidance of incremental funds into financial markets. It also highlights opportunities arising from the Federal Reserve's rate-cutting cycle to expand high-quality financial openness and attract international patient capital, providing new momentum for China's economic recovery.
**Key Highlights from the Report:**
1. **Methodology of CAFI** The index is grounded in the intrinsic link between financial activities and the real economy. It comprises six sub-indices: - Money Supply Index (MSI): Reflects market liquidity. - Credit Conditions Index: Tracks bank credit markets. - Stock Market Index (SSI) and Bond Market Index: Depict financial market conditions. - Exchange Rate Pressure Index: Monitors forex market dynamics. - Real Estate Conditions Index (RSI): Assesses the property market.
CAFI provides a quantifiable, comparable, and trackable assessment of China's financial landscape, serving as an early-warning tool for policymakers and investors.
2. **Validation and Leading Properties** - CAFI leads GDP growth by about one quarter and CPI by 9–10 months, outperforming traditional indicators like PMI (1–2 months ahead). - Historical data shows reduced financial volatility post-2016, signaling improved stability despite subdued activity.
3. **Current Financial Conditions (Q3 2025)** - Money and credit markets are in "mildly positive" territory. - Stock markets (SSI) show modest recovery, while bond markets (BSI) remain "mildly cool," reflecting a seesaw effect in capital allocation. - Forex pressures (EPI) persist due to past Fed tightening but are expected to ease as rate cuts commence. - Real estate (RSI) stabilizes near neutral but lacks strong momentum.
4. **Policy Recommendations** - Maintain accommodative monetary policy to counter deflationary risks. - Guide incremental funds into markets to break the stock-bond capital competition. - Leverage the Fed's easing cycle to attract foreign capital and enhance financial openness. - Adopt localized, flexible measures for real estate and forex market stability.
The report underscores CAFI's role as a critical tool for macroeconomic analysis and policy formulation amid evolving financial conditions.