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China’s Central Economic Work Conference: A Blueprint for 2025

The Central Economic Work Conference held in December 2024 has outlined a roadmap for China's economic strategy in 2025, providing in-depth analyses of the current economic situation while setting the stage for the forthcoming year. This annual event is critical in shaping China’s policy direction as it highlights both challenges and opportunities for economic growth.

Conference Highlights

During the conference, Han Wenxiu, Executive Deputy Director of the Office of the Central Committee for Financial and Economic Affairs, announced that China is projected to attain approximately 5% economic growth for the year 2024. Furthermore, he noted that China's contribution to global economic growth is anticipated to reach around 30%. Stability was emphasized in key areas such as employment and pricing. China's foreign exchange reserves stood robustly at over $3.2 trillion, showcasing the nation’s financial health despite global pressures.

Nevertheless, various challenges loom large over the economic landscape. The conference identified insufficient domestic demand, operational difficulties faced by businesses, and risks impacting employment and income growth as significant hurdles. While the foundation of China's economy remains solid, the conference called for urgent action to stimulate demand and bolster growth.

Policy Adjustments

A major theme emerging from the conference was the call for a more proactive fiscal policy. The announcement marks a linguistic and directional shift from previous years, aiming for enhanced fiscal measures to support economic stability. The government will adjust the deficit-to-GDP ratio to 3% for 2024 and indicated a necessity for an increased deficit ratio for 2025. The intent is clear: to ramp up government spending to address the current insufficiency in domestic demand.

The fiscal strategy will undergo transformation from an investment-focused approach to one that balances investment with consumer needs, prioritizing improvements in citizens’ livelihoods and consumption. Yuan Haixia, Deputy Director of the Research Institute of China Chengxin Credit Rating Group, stressed that this pivot is essential to our changing economic dynamics.

Furthermore, the issuance of ultra-long treasury bonds and local government special-purpose bonds is set to rise, putting financial resources into essential areas that stimulate growth.

Monetary Policy Shift

The conference also proposed to transition the monetary policy from a