Annual economic work conference presents roadmap for 2025

BEIJING, Jan. 2, 2025 /PRNewswire/ -- A news report from Beijing Review:

The year-end Central Economic Work Conference is a pivotal event in China's economic calendar, serving as a platform to analyze the nation's economic landscape, set the policy tone, and outline key priorities for the coming year. In 2024, it convened in Beijing on December 11-12. 

"China is on track to achieve its key economic and social development goals for the year, with an anticipated economic growth rate of around 5 percent," said Han Wenxiu, Executive Deputy Director of the Office of the Central Committee for Financial and Economic Affairs, elaborating on the key points of the conference at a meeting on December 14.

He added that China's contribution to global economic growth is expected to approach 30 percent. Employment and prices have remained stable, a basic equilibrium in the balance of payments has been largely maintained, and the country's foreign exchange reserves have remained robust at over $3.2 trillion.

Despite this, the adverse effects of changes in the external environment have intensified, and China's economy continues to face a range of difficulties and challenges. Challenges discussed at the conference include insufficient domestic demand, operational difficulties for some businesses, pressure on employment and income growth for the population, and persistent risks and uncertainties.

However, according to the assessment presented at the conference, the foundation of the economy remains stable, with sufficient advantages, strong resilience and huge potential.

The conference outlined key adjustments to the country's macroeconomic policies, emphasizing a shift toward more proactive and impactful approaches. It called for the adoption of a "more proactive fiscal policy" and a "moderately loose monetary policy." Han said this marks a major change in both language and direction when compared to previous years.

The wording regarding fiscal policy has been adjusted from "proactive" to "more proactive," implying additional efforts will follow in 2025.

The deficit-to-GDP ratio was set at 3 percent for 2024, and the conference first explicitly stated the need to set a higher deficit ratio for 2025 to ensure that fiscal policies will maintain continuity and become more effective.

To address the current issue of insufficient domestic demand, it is necessary to increase government spending. And it's both necessary and feasible to increase the deficit ratio, said a recent commentary by newspaper Economic Daily.

From an international perspective, China's government debt ratio is much lower than that of major economies and emerging market countries. According to the International Monetary Fund, by the end of 2023, the average government debt ratio of Group of Seven countries was 123.4 percent, while that of China stood at 67.5 percent. This indicates that there remains considerable room for the Central Government to issue debts and expand the deficit.

In addition, China will also increase the issuance of ultra-long special treasury bonds and local government special-purpose bonds.

The conference also emphasized the need to optimize the structure of fiscal expenditures, improve the efficiency of fund usage, and place greater emphasis on enhancing people's livelihoods and stimulating consumption.

The structure of fiscal expenditures should align with the stage of economic development, shifting from an investment-focused approach to one that balances investment and consumption. This marks a transition from a construction-driven fiscal policy to one that prioritizes people's livelihoods, said Yuan Haixia, Deputy Director of the Research Institute of China Chengxin Credit Rating Group.

Monetary policy will shift from "prudent" to "moderately loose," with reductions in the reserve requirement ratio and interest rates at an appropriate time, according to the conference.

China's central bank, the People's Bank of China, adjusts its monetary policy in response to changes in the economic situation. Since 2011, China's monetary policy has consistently been "prudent." This adjustment is the first change in over a decade.

Zeng Gang, Director of the Shanghai Institution for Finance and Development, told Xinhua News Agency that a moderately loose monetary policy helps maintain reasonable liquidity, reduces the overall financing costs in society and further expands domestic demand, unlocking the potential for consumption and investment.

Han said these policies are beneficial for enhancing counter-cyclical adjustments, better addressing the instability and uncertainty in economic operations, and providing strong policy support to achieve the annual goals and objectives.

Counter-cyclical adjustment refers to the government's use of policy tools and measures to smooth out the fluctuations of the entire economic cycle, helping to better promote economic development by responding to different stages of the economic cycle.

The conference outlined nine key tasks for 2025, with "vigorously boosting consumption, improving investment efficiency and expanding domestic demand on all fronts" listed as the top priority.

"In recent years, expanding domestic demand has been a top priority, and it is especially crucial in 2025, as external demand is expected to further weaken," Xu Hongcai, Deputy Director of the Economic Policy Commission at the China Association of Policy Science, told Beijing Review. In this context, to ensure steady economic growth, it is essential to boost internal demand. This can be achieved by focusing on both investment and consumption, he said.