Global banking industry faces headwinds amidst shifting monetary, political landscapes: BOC

It is expected to see pressures on profit growth and uneven expansion.

The global banking industry faces significant challenges as it navigates potential shifts in monetary policies and changes in political landscapes, according to a report by the Bank of China (BOC) Research Institute. 

The sector is expected to experience increasing uncertainties in its operating environment, pressures on profit growth, uneven expansion, persistent risks, and relatively stable capital adequacy levels.

In 2025, China's banking industry is anticipated to adapt to the evolving policy environment, leverage opportunities from pro-growth policies, and continue playing a vital role as a primary source of financing for the real economy. 

Banks are expected to drive solid expansion, emphasise risk management, and strengthen profit growth and capital foundations to ensure sound operations, it added.

The BOC Research Institute highlighted the resilience of China's economy in 2024, despite weakening during the first three quarters of the year. Pro-growth policies introduced since September have led to positive developments in various sectors. 

However, the economic recovery's foundation remains in consolidation, with real estate and domestic demand showing signs of bottoming out, the report said.

Initial estimates suggest that China’s GDP growth for 2024 will be around 5%. In 2025, internal and external policy changes are projected to significantly influence the trajectory of China's economy. 

Domestically, the enhancement and execution of incremental policies will be crucial for sustaining economic recovery. Externally, the anticipated tariff adjustments targeting China under US President-elect Donald Trump’s administration are likely to impact exports significantly.

The BOC Research Institute forecasts a GDP growth rate of approximately 5% for China in 2025. To support this growth, future macroeconomic policies must focus on stabilising growth in the short term while promoting reform in the medium to long term, according to the report.

These policies should address external uncertainties and reinforce the internal momentum driving economic growth, it added.