THE China’s Central Economic Work Conference held in Beijing from December 10 to 11 highlighted the salient features of its macro-economy and its positive prospects in the days ahead, conveying a message of stability, sustain-ability, diversity, innovation, digitalization and openness to international markets and investors alike.
It is a good omen that Chinese policymakers are expected to further strengthen the dual circulation model, focusing on strong domestic demand and exports through increasing international trade, aiming for around 5pc economic growth.
Despite US President Trump’s trade and tariff war, the Chinese economy demonstrated resilience, sustaining export momentum and emerging as a stable and reliable trading partner. Strong ties with BRI partners, the expansion of BRICS and participation in the Regional Comprehensive Economic Partnership have significantly supported export growth outside the US, particularly toward the European Union, ASEAN, Latin America, Central Asia, Africa and South Asia.
Even regional US allies, including Australia and several European countries, witnessed a surge in Chinese imports, with China’s exports to the EU increasing by 14.8pc. The concept of “non-US exports” has gathered momentum, fur-ther diversifying China’s exports and manufacturing capacity. Although shipments to the US declined nearly 29pc year-on-year in November, strong growth in other markets lifted total exports by 5.9pc, pushing China’s trade surplus beyond US$1 trillion for the first time.
However, Europe’s sluggish economic performance, with the UK barely growing and the EU expected to expand only 1.4pc in 2025, may create challenges for China’s exports during 2026. The writer suggests that Chinese policymakers adopt an integrated approach to strengthen domestic demand through household consumption, business investment and government expenditure. Effective short-term economic and financial stimulus should be balanced with long-term structural reforms, as the property-driven investment model has largely run its course. Demand should therefore be restructured toward household spending, supported by consumer-oriented industries.
Supply-side upgrading in sectors ranging from electronics to sporting goods, with deeper integration of AI, should be stimulated through measures such as discount vouchers or tax rebates. The relatively low share of services consump-tion in China needs to be enhanced and activated. Policies promoting travel, tourism and dining services will be essen-tial, along with strengthening service-sector labour supply and encouraging labour mobility across the country.
Good governance, financial transparency and fiscal policies must be revisited and implemented at the grassroots level. Expansionary fiscal policies should target key social needs, including healthcare, childcare, elder care and education. Lifting workforce productivity and investing in people should therefore remain a strategic priority. The IMF has raised its forecast for China’s economic growth to 5pc in 2025 and 4.5pc in 2026, reflecting upgrades driven by solid exports and fiscal stimulus. In a global environment of slow growth, a 5pc growth rate remains attractive, particularly as China advances structural reforms while managing external headwinds.
China’s Central Economic Work Conference placed reform at the core of its agenda. Economic stability and sustain-ability are expected to be achieved through high-quality development, innovation, digitalization and AI; therefore, structural hurdles must be removed and reform must advance in a coordinated and determined manner. The writer advocates balancing the “invisible hand” of the market with the “visible hand” of government, creating a governance system in which an efficient market and a well-functioning government reinforce each other. The Fourth Plenary Ses-sion of the 20th Central Committee of the CPC in 2025 further elevated this principle by offering a roadmap for mod-ernizing economic governance.
Modern governance requires a transition from factor-driven to innovation-driven growth and from passive adjustment to proactive institutional design. Structural reforms must remain a strategic priority beyond 2026. Reforms should target deep-seated constraints, limited innovation capacity, regional disparities and rising ecological pressures by es-tablishing evaluation systems based on quality and efficiency rather than sheer output. This would encourage firms to compete on innovation and sustainability. Stronger policy coordination aligning industrial, technological, environ-mental and market reforms should be pursued to ensure long-term momentum and stability.
A balanced market–government relationship is the need of the hour, supported by a coordinated governance system. Chinese policymakers should accelerate legislation to build a unified national market, strengthen fair competition rules and eliminate local protectionism, regional barriers and discriminatory entry requirements. Removing these ob-stacles will improve market circulation, unlock the potential of China’s vast domestic market and curb wasteful, low-efficiency competition.
Regulatory evolution should be pursued through an integrated approach combining law-based regulation, credit-based oversight and digital tools. Strengthening competition policy and curbing administrative monopolies should be im-plemented through innovation and digitalization. There is an urgent need to improve overall resource efficiency by ensuring the smooth flow of production factors such as technology, data, capital, land and labour, which directly af-fect economic vitality. Structural reform should enhance market-based allocation mechanisms, expand pilot programs and create flexible channels for factor mobility.
Chinese policymakers should gradually remove barriers to cross-regional movement of labour and capital, allowing resources to follow viable projects and strategic priorities. Reform of small and medium-sized financial institutions and deeper capital-market reforms should ensure transparency, financial strength and economic vibrancy through in-novative mechanisms. Stronger legal protection for property rights and fair competition should foster complementary growth between public and private enterprises.
Finally, a clearer division of central and local spending responsibilities, tax-system reform, expansion of local tax sources and enhanced tax administration can help establish an effective, transparent, rules-based and performance-oriented budgeting system. This would improve public-spending efficiency and enable fiscal policy to better support growth, structural upgrading, public services and risk prevention.
—The writer is President, the Centre for Knowledge and Public Policy, Regional Expert: China, CPEC, BRI & World Affairs.
