Every December, China holds a Central Economic Work Conference (CEWC). This conference takes stock of the economy’s performance during the current year and sets the tone for the next year. The conference is mainly meant for economic issues, but some party-related issues are also discussed. The CEWC is always preceded by a meeting of the Politbureau (the Meeting). In 2024, the Politbureau met on 9th December and laid down some guidelines; it was followed by the CEWC on 11th and 12th December. The Meeting and the CEWC both put together, determine the actions to be taken for the Chinese economy in 2025.
The Politbureau Meeting concluded that the Chinese economy progressed steadily, that the country displayed excellent technological capabilities, and its comprehensive national power continued to increase. It expressed confidence that the main economic and social development goals set for 2024 would be completed and emphasized the need for better coordination between development and security, to expand domestic demand and to stabilise the real estate and stock markets.
This is an important statement. Analysis by external analysts say that China has swapped development for security. In fact, China is conscious of the need for both as it traverses a contested future. Increasing the domestic demand has long been a problem; the real estate issue that first blew up in 2021 and is still in crisis, is the basis of the dismal predictions on China’s economy. The Meeting also mentioned preparations for the 15th five-year plan, which will commence in 2026.
China’s financial policies were assessed, with suggestions for implementing a more active fiscal policy and a moderately loose monetary policy. For too long, China’s fiscal deficit has been held at 3% or below. The discussions on the subject, indicate this may be increased. It is the particular use of the phrase, “moderately loose monetary policy” that drew attention; the last time, this phrase was used was during the international financial crisis of 2008, when China announced a stimulus package of $586 billion. Therefore, it is valid to presume that 2025 will see a financial stimulus from the Chinese central government. This will align with the Meeting’s other messages of opening the economy further and stabilising foreign trade and investment – a key dimension given the threat of U.S. tariffs.
At the Meeting, the party’s control over the economic agenda and implementation was reiterated and a Mao era phrase “seeking truth from facts (实事求是)”, an idiom from the Book of Han and used by Mao Zedong, found its place in the read-out, reinforcing the importance of party’s role. Two terms, Two Establishes (两个确立) and Two Upholds (两个维护) were mentioned twice, and their meanings are intentional. The terms refer to the establishment of Xi Jinping as the core of the party leadership, and in the central position of the whole party, followed by the party resolutely upholding Xi Jinping as the core of the party centre and his holding that position. The establishes refer to the entirety of the party; and the upholds are about supporting the authority of the party centre and of its centralised, unified leadership. The Meeting’s read-out finally referred to social stability, and how China must do a good job of guaranteeing peoples’ livelihood and overall social stability – indicating that there are shortcomings in social coherence.
Despite being the annual economic statement of the Chinese government, the CEWC does not give out economic figures. It’s focus is the priorities for China’s Central Government to work on. There are usually some key points for the year ahead which are to be the priority areas for implementation In 2024, the CEWC has kept nine priority areas for 2025, as was for 2024. These are tabulated below.
2023 | 2024 |
Lead the construction of a modern industrial system with scientific and technological innovation | Vigorously boost consumption and improve investment efficiency to expand domestic demand comprehensively |
Focus on expanding domestic demand | Lead the development of new productive forces through technological innovation and build a modern industrial system |
Deepen reforms in key areas | Leverage the role of economic system reform and promote the implementation of landmark reform measures |
Expand high-level opening-up to the outside world | Expand high-level opening up, stabilise foreign trade and investment |
Continuously and effectively prevent and resolve risks in key areas | Effectively prevent and resolve risks in key areas, and prevent systemic risk |
Persistently and diligently work on agriculture, rural areas, and farmers (‘three rural issues’) | Coordinate the promotion of new urbanisation and comprehensive rural revitalisation, and integrate urban-rural development |
Promote the integrated development of urban and rural areas and regional coordination | Strengthen the implementation of regional strategies and enhance regional development vitality |
Seriously promote the construction of ecological civilization and green, low-carbon development. | Coordinate carbon and pollution reduction, green expansion and growth, accelerate comprehensive green transformation of economic and social development |
Effectively guarantee and improve people’s livelihoods | Increase efforts to ensure and improve people’s livelihood, enhancing public gain, happiness, and security |
The priority areas and all the nine points are almost identical. Only in the first three, the order has changed. China has struggled with increasing the domestic consumption due to issues such as unemployment (Youth unemployment was 17.1% in October 2024), and therefore has prioritised it from second to first place. In 2023, domestic consumption was $3,752 and in 2024 it is likely to increase in single digits as a percentage – by 3.7% to 4 per cent. There have been efforts to boost consumption by giving money handouts to presumably those still living in poverty – the amount varies from province to province as provincial governments are assigned this task – to spend during the Chinese New Year coming up on 29 Jan, 2025 (Year of the Snake).
Technological innovation, which was top priority last year, has been shifted to second place this year. However, innovation continues to figure high in the priority list; clearly China is giving more importance to innovation than GDP growth.
In third place is deepening of reforms. This year the document has added leveraging economic system reforms. It is not evident that large scale reforms will be undertaken by China in 2025; most analysis is circumspect about it.
China continues to believe in globalisation, and the opening up of China’s economy is in preparation for it. While traditional western and Asian partners may benefit, in the India-China context, entry barriers continue to keep Indian companies out and this is unlikely to change.
The point on risk management refers to the real estate crisis; the additional focus on preventing systemic risks is indicative of stress in the economy due to various factors like overspending, corruption, vanity projects and provincial government debt .
The remaining priority areas are by and large the same. Regional development as part of rural development is important as China has experienced uneven growth between its vast regions. The previous specific urban-rural integrated development has given way to regional development vitality, thereby emphasising the importance of rural over urban development As per the National Bureau of Statistics of China and CEIC data, rural unemployment was 4.56% in 2019. It increased to 5% in 2020 and it is now at 4.67%. These figures are those of people registered to seek employment. The urban- rural divide is a perennial issue that keeps troubling China and will continue to do so for some time to come.
So what does the Politbureau meeting indicate about China in 2025? That there will be a focus on five dimensions: Implementation of more active macro policies; expansion of domestic demand; stabilisation of real estate and stock markets; implementation of an active fiscal policy and moderately loose monetary policy.
Combining these with the priorities listed in the CEWC, China in 2025 will see the following:
- Lower interest and mortgage rates
- Issuance of large and extra-long duration treasury bonds – $ 411 billion worth in 2025.
- Increase in the fiscal deficit to 4%.
- An emphasis on the quality of development Over the previous focus on faster economic growth.
- Freedom to the provinces to: Swap bond projects for hidden debt; increase debt quota by $840 billion over three years; allow use of $560 billion over five years of debt. The aim is to assist provincial governments to overcome their debt and invest in new growth-oriented projects.
- A recapitalisation of the banks and increased financial support, India style, for low income groups and students.
- Though CEWC did not release any statistics, the IMF estimates indicate China’s GDP growth at 4.5% for 2025.
How China navigates and emerges from an economy already under pressure with the added worry of high tariffs from U.S President Trump’s second term, will determine the success of being able to implement the tasks spelt out by CEWC 2024. China must manage better the persisting issues in the economy. The critical meetings of 2024 done, and homework given for 2025, the wait starts now for the next big meeting and policy indication from China – the National People’s Congress in March 2025, which will give out growth expectations and other estimates.
Lt Gen S L Narasimhan is the Adjunct Distinguished Fellow for China and National Security Studies at Gateway House.
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