At the 2024 Central Economic Work Conference, policymakers candidly addressed the pressing difficulties facing China’s economy and responded to widespread domestic and international concerns. Issues such as weak consumption, the real estate downturn and local debt risks have not only become focal points for foreign media and global think tanks but also reflect deep-seated structural challenges. The conference emphasized the need to tackle these challenges head-on and introduced a series of targeted policies to guide economic development in 2025.
I. Tackling economic challenges and recognizing structural issues
This year’s conference stood out for its candid acknowledgment of key challenges, particularly highlighting pressures on corporate and household incomes. This reflects a deep understanding of the structural issues within the economy and provides a clear direction for subsequent policy adjustments.
The 2024 Central Economic Work Conference identified the following critical challenges for the Chinese economy:
• A challenging external environment
The international landscape has grown more complex, with heightened geopolitical risks and a slowing global economy. Weakening external demand has added significant pressure on China’s economic growth.
• Weak domestic demand
Stagnant consumption growth and investment has diminished domestic demand’s role as a driver of economic recovery, constraining sustainable growth.
• Intensified business pressures
Rising costs and insufficient market demand have eroded business profitability, intensifying operational pressures.
• Employment and income challenges
A challenging employment outlook and slower income growth have curbed consumer purchasing power and affected the overall quality of life.
• Economic risks require mitigation
Declines in the real estate market, mounting local government debt risks, and latent vulnerabilities in the financial sector remain prominent concerns requiring vigilant attention and proactive mitigation.
II. Policy adjustments: Turning challenges into solutions
President Xi Jinping emphasized the importance of tackling difficulties with determination and confidence in addressing economic challenges to promote high-quality development. During a meeting with representatives from outside the Communist Party of China, Xi remarked: “Our country faces many uncertainties and challenges that must be taken seriously and addressed resolutely.”
In line with the news release from the conference and recent discussions at the 20th Third Plenum and Central Politburo meetings, the 2024 Central Economic Work Conference outlined clear policy directions and measures. These aim to address structural contradictions, alleviate market concerns and inject confidence and vitality into the economy. The determined approach echoes the American saying, “When the going gets tough, the tough get going”:
• Strengthening countercyclical adjustments
Policymakers emphasized stabilizing the economy through countercyclical measures to address weak domestic demand and declining growth momentum. By ensuring “overall stability in employment and prices while promoting synchronized growth in household income and economic output,” the government aims to reduce pressures on businesses and households, fostering both a short-term recovery and long-term stability.
• Flexible fiscal and monetary policies
To address local fiscal pressures and high corporate financing costs, fiscal policies will include a higher deficit ratio, the issuance of special bonds and expanded government investment, particularly to support grassroots public services. On the monetary side, the conference called for “timely reserve requirement and interest rate cuts” to inject liquidity into the market and reduce borrowing costs. This dual-pronged approach not only provides support for local governments and enterprises but also stabilizes market expectations for China’s economic growth.
• Boost domestic demand
To revitalize consumption and investment, the government plans to raise incomes for low- and middle-income groups, implement special actions to stimulate consumption and optimize consumer scenarios, leverage government investment to catalyze private capital, accelerate key projects and enhance urban renewal efforts. These measures aim to create sustained momentum for domestic demand while addressing structural economic imbalances.
• Stabilize real estate and capital markets
To address the sluggish real estate market, policies will focus on “stopping the decline and stabilizing the sector” through initiatives such as renovating old properties and utilizing housing bank buybacks to stimulate demand for essential and improved housing. In the capital market, reforms will deepen to attract long-term investment, optimize corporate governance and enhance market stability. These initiatives aim to restore investor confidence and reinforce the foundations of the real estate and financial markets.
• Advance technological innovation
Recognizing the need to overcome weaknesses in core technologies and enhance traditional industry competitiveness, policymakers introduced the “AI+” initiative to spur development in emerging industries. Strengthened collaboration between academia and industry and accelerated commercialization of research outputs aim to transform innovation into productivity, bolstering China’s global competitiveness and underscoring the importance of innovation-driven growth.
• Improve business environment and policy coordination
To boost confidence in the private sector and inefficiencies in policy execution, the government plans to implement the Private Economy Promotion Law and deepen state-owned enterprise reforms. Efforts to streamline coordination by departments aim to remove bottlenecks in policy implementation, ensuring efficient and effective execution. These steps reflect the government’s commitment to enhancing policy effectiveness and reinvigorating market entities.
III. Outlook: Signals and expectations
The signals from the 2024 Central Economic Work Conference reflect shifts in policy trends.
• Policies combining stability and flexibility
The conference adopted the tone of the Dec. 9 Central Politburo meeting, calling for “more proactive macroeconomic policies.” For the first time, the combination of “more active fiscal policies” and “moderately loose monetary policies” was emphasized, balancing stability with adaptability.
Fiscal policies will break traditional deficit constraints by increasing the deficit ratio and issuing special and ultra long-term bonds to provide substantial funds for economic recovery. The reintroduction of monetary easing signals policymakers’ readiness to stabilize growth and counter external shocks.
• Gradual recovery of market confidence
The systematic deployment of proactive policies sends a clear signal: China is steadily addressing challenges and laying the groundwork for long-term growth. Confidence, however, will take time to rebuild and will depend on the effective implementation of policies and improvements in economic indicators.
• Long-term policy evolution
The transmission of policy effects requires patience, and the possibility of further stimulus depends on the performance and progress of current measures. Policymakers will dynamically assess outcomes and respond to shifts in the global economic environment. Long-term priorities will focus on technological innovation, structural reforms and regional coordination to drive sustainable development.
• Implications for global economy
China’s policy adjustments have global significance. As the world’s second-largest economy, its stability and policy clarity will positively influence global market expectations. Renewed commitments to high-level openness and support for foreign investment will create new opportunities for international capital and reinforce global supply chain stability.
Conclusion:
Steady path to economic expansion
The 2024 Central Economic Work Conference addressed pressing economic challenges with clear, targeted strategies, reflecting a candid understanding of current issues and a resolute determination to overcome them. At this critical moment, the government’s precise policy adjustments provide a solid foundation for future growth. As these measures take effect, China’s economic expansion will gain momentum, serving both domestic development and global confidence.
