WHILE chairing the annual Central Economic Work Conference the Chinese President Xi Jinping chalks out new holistic and comprehensive roadmap for maintaining the economic stability and sustainability by implementing more integrated and diversified macroeconomic policies in 2025 prioritizing the increase of fiscal deficit ratio, implementing a moderately loose monetary policy, expanding domestic demand and stabilizing real estate and stock markets. It vividly reflects implementation status of China’s 14th Five-Year Plan, highlighting that China has made solid progress in high-quality development and is about to accomplish this year’s growth target of more than 5pc GDP.
It is good omen that despite the complex and complicated geopolitical and geostrategic scenarios and increasing internal difficulties, China has ensured the overall stability and steady progress of its national economy and the major goals and tasks for economic and social development in 2024 are expected to be accomplished which is indeed a great achievement. The policy makers’ stressing to adopt more proactive macro policies, expand domestic demand and promote the integrated development of scientific and technological innovation and industrial innovation to do a good job in economic work in 2025 shows its strong commitment to maintain and diversify its economy, productive channels, implement immense social development policies through coordinated policies of openness, modernization, digitalization and qualitative industrialization.
The regional and international markets positively reacted on the announcement of the Chinese policy makers that sincere efforts will be initiated securing the steady development of the real estate and stock markets, guarding against and defuse risks and external shocks in key areas, and stabilize expectations and stimulate vitality so as to promote sustained economic recovery. Moreover, according to the meeting, China will also adopt a “more proactive” fiscal policy, including an increase in the ratio of deficit and in the issuance of ultra-long special treasury bonds and local government special-purpose bonds. According to the Ministry of Finance, China’s government debt-to-GDP ratio, stood at 67.5 percent at the end of 2023, much lower than the average 118.2 percent among G20 members and 123.4 percent for G7 countries estimated by the IMF. China’s fiscal deficit has long been below 3 percent, significantly lower than other major economies.
It is hoped that with a low government leverage ratio, China’s central budget has room for increased borrowing and deficit expansion. Furthermore, adopting of a moderately loose monetary policy and lower the reserve requirement ratio and interest rates when necessary to ensure adequate liquidity which would be value addition for the banking & financial sector of the country during 2025 and beyond also mitigating spillover socio-economic ramifications of the Trump Trade War 2.0 heavily relying on the increase of tariffs. Comparative studies reveal that since the beginning of 2024, the People’s Bank of China, the central bank, has cut the reserve requirement ratio twice, by 1 percentage point in total, for financial institutions, releasing approximately 2 trillion Yuan (about US$274.8 billion) in long-term liquidity.
It seems that the listing of priorities for economic work in 2025 in nine aspects, from stimulating consumption and developing new quality productive forces to preventing and addressing risks in key areas, consolidating poverty alleviation achievements and boosting green development is timely, positive, productive, participatory, futuristic and comprehensive. Thus boosting consumption, improving investment efficiency and expanding domestic demand on all fronts would further gear the economy and its associated sectors towards greater comfort zones during 2025. According to the National Bureau of Statistics China remains one of the largest markets in the world. From January to October this year, China’s total retail sales of consumer goods approached 40 trillion Yuan, while last year’s total exceeded 47 trillion Yuan. A national program aimed at promoting consumer goods trade-ins, unveiled in March has demonstrated the untapped room of China’s domestic demand. Over 30 million participants have been attracted to the program, contributing total sales of over 400 billion Yuan, thus further promotion of high-level opening up and secure the steady growth of foreign trade and foreign investment is right step towards right direction. On the other hand, while meeting with leaders of major international economic organizations, including the IMF, the Chinese President Xi rightly termed China’s development as open and inclusive through putting in place new systems for a higher-standard open economy, providing more opportunities for the development of other countries and share more development benefits with the world. Additionally, starting December 1, China has granted zero-tariff treatment for 100 percent of tariff lines to all least developed countries with which it has diplomatic relations helping more products from these countries enter the Chinese market. The meeting also highlighted that China will strengthen unconventional countercyclical adjustments in 2025.
Interestingly, the latest World Openness Index evaluated the openness levels of 129 economies from 2008 to 2023, identifying China as a bright spot amid declining global openness. China’s high level of inclusivity and opening up benefits both regional and global economies. Expanding domestic demand, deepening structural reforms, and advancing economic growth are pivotal for sustaining these benefits. Promoting growth in equipment manufacturing, nurturing new energy vehicles and low-altitude aircraft, and enhancing global supply chain resilience will further strengthen its macroeconomy in 2025.
Additionally, fostering technological innovation and establishing a modern industrial system are crucial to transforming China’s economy, industry, and production mechanisms. Digitalization, modernization, trans-regional connectivity, green transformation, hybrid agriculture, and artificial intelligence will serve as key drivers for economic growth beyond 2025. Policymakers must prioritize balancing innovation investments with operational demands, unlocking the innovation potential of companies, and utilizing industry front-runners to boost research and practical technologies. By taking these measures, China can ensure sustained growth and contribute positively to the global economy.
—The writer is President, Pak-China Corridor of Knowledge, Executive Director, CSAIS, regional expert: China, CPEC & BRI.
