The annual Central Economic Work Conference (CEWC) held in Beijing last week outlined nine priorities for national socioeconomic development in the coming year, including vigorously boosting domestic consumption and enhancing investment returns; promoting the development of new quality productive forces and a modern industrial system by making full use of scientific and technological innovation; leveraging structural economic reform as a driving force to enforce landmark reform measures; stabilizing foreign trade and investment by advancing high-level institutional reforms; addressing financial and systemic risks; promoting urbanization and rural revitalization; strengthening strategies to boost regional development; accelerating green transition to achieve sustainable growth and carbon reduction goals; and enhancing livelihoods and social stability to boost people’s sense of gain, happiness, and security.

The annual CEWC is a barometer for gauging China’s economic direction in the coming year. This year’s conference, which unveiled a slew of powerful policy measures, has attracted global attention amid increasing uncertainty in the global landscape.

While acknowledging that the Chinese economy faces difficulties and challenges amid the growing negative impact of the external environment, the conference noted its strong foundation, advantages, resilience and development potential. It also noted that the conditions for and fundamental trend of the Chinese economy’s long-term development remain unchanged.  

Now that markets have become a scarce resource, China possesses huge advantages thanks to the sheer size of its domestic market: China is rapidly enhancing its innovation capacity, leveraging its vast domestic market as innovation is becoming the key engine of economic growth; China also boasts a complete industry chain, whose stability helps the country buffer against external risks. As long as these advantages remain unchanged, the parameters underpinning China’s economic sustainability will remain solid.

The CEWC underscored the importance of stimulating domestic consumption by placing the notion of “boosting consumption and expanding domestic demand on all fronts” at the top of its priority lists.

Investment, exports and consumption used to be the “three pillars” of the country’s economic growth. In the past, whenever China faced an adverse external environment that hampered exports, it primarily relied on expanding investment to spur economic growth. That domestic consumption is prioritized this time reflects drastic changes in both the internal and external environments.

Externally, Washington is likely to impose additional tariffs on Chinese products after Donald Trump takes office in January. An escalated Sino-US trade war would inevitably weaken Chinese exports and their contribution to economic growth.

Internally, China has made colossal investments in infrastructure, leaving little room for further government-led investment in infrastructure. Meanwhile, domestic consumption has reached a turning point where traditional consumption is languishing while consumption is growing in sectors such as culture, tourism, education, elderly care, and premium healthcare. The flip side of sluggish overall consumption is a rise in personal savings among Chinese residents. This indicates a need to harness policy tools to reinvigorate consumer spending.

The CEWC delineated major measures to bolster consumption, including initiatives to stimulate consumption on specific products, promoting the trading-in of old products for new ones, undertaking urban renewal, and reducing overall logistic costs.

When implemented together, fiscal and monetary policies will help stabilize the real estate and stock markets, inject new momentum for growth, and facilitate livelihood improvement projects. All in all, the policy pack adopted by the CEWC heralds a more favorable economic landscape

The central government is not only dedicated to stimulating residents’ appetite for consumption but also improving the consumption environment and reducing the cost of consumption in order to boost consumption on all fronts.

Among the nine policy priorities for next year, the use of scientific and technological innovation to lead the development of new quality productive forces and building a modern industrial system is another highlight. Measures include launching an “artificial intelligence+” campaign to cultivate future industries; augmenting national sci-tech capabilities; optimizing a multitiered financial service system, and attracting private capital to support entrepreneurial investments.

Among the nine major policy initiatives, the one on “stabilizing foreign trade and investment by promoting high-level reforms” has garnered wide attention at home and abroad. The proposed measures include deepening voluntary, unilateral opening-up and institutional opening-up in an orderly manner.

In the face of the “decoupling” threat and supply chain disruption from the US, China is doing the opposite — by embracing voluntary, unilateral opening-up and institutional opening-up, reflecting Beijing’s strategic vision for the Chinese and global economies.

The deepening of opening-up will facilitate the flow of production factors, foster innovation, reduce transaction costs, and create development opportunities, benefiting both China and the world. The conference decided to pursue a “more proactive” fiscal policy, raise the fiscal deficit ratio, increase ultra-long-term special government bonds and local government special-purpose bonds, and optimize the structure of fiscal expenditure.

When the momentum for economic growth is insufficient, issuing an appropriate amount of debt to stimulate economic growth is a common practice among nations. According to official data, China’s fiscal deficit ratio for 2024 was set at 3 percent. This figure is expected to exceed 3 percent in 2025, reflecting a “more proactive” fiscal policy.

The conference also decided to implement a moderately loose monetary policy, with reductions in the reserve requirement ratio and interest rates at appropriate times to ensure ample liquidity. The aim is to align money supply and social financing growth with economic and price-level targets.

The anticipated reductions in the reserve requirement ratio and interest rates next year augur well for investor confidence and business climate. The required alignment of financial indicators and other economic indicators, as emphasized by the CEWC leadership, indicates that the central government attaches importance to the coordination and effectiveness of fiscal and monetary policies.

When implemented together, fiscal and monetary policies will help stabilize the real estate and stock markets, inject new momentum for growth, and facilitate livelihood improvement projects. All in all, the policy pack adopted by the CEWC heralds a more favorable economic landscape.

The author is vice-chairman of the Committee on Liaison with Hong Kong, Macao, Taiwan and Overseas Chinese of the National Committee of the Chinese People’s Political Consultative Conference and chairman of the Hong Kong New Era Development Thinktank.

The views do not necessarily reflect those of China Daily.