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Pedestrians watch a traditional dragon dance on a shopping street in downtown Shanghai on January 18, 2025. Photo: VCG

The year 2024 proved to be truly extraordinary. Facing a complex and rapidly evolving domestic and international landscape, China rolled out a package of incremental pro-growth economic policies, while deepened reform and expanded openness.

China's economy has maintained steady and positive momentum, with industrial output and exports surpassing expectations. New quality productive forces are being developed, significant strides have been made in addressing risks in key sectors, social expectations have visibly improved, and overall societal stability has been upheld. The foundations for economic stability have been further solidified and the momentum for progress continues to build.

Over the past year, the world has witnessed a wave of unprecedented changes. These factors have amplified the complexity, severity and uncertainty of the global landscape. 

Domestically, the country's real estate market has continued an in-depth correction, while the issue of insufficient social demand has become increasingly noticeable. Despite these hurdles, China's economy has remained on a steady and reasonable growth path. 

The economy has defied predictions of entering into "an economic recession" or "economic peak" as claimed by some foreign analysts, while simultaneously making strides in improving the quality of development. Once again, China's economy has outperformed Western expectations. These facts stand as a testament to China's remarkable resilience and immense growth potential. The long-term positive trajectory of the economy remains intact.

Looking ahead, 2025 will mark the final year of the 14th Five-Year Plan period (2021-25), and China's economy is poised to keep its stability and likely gain new momentum, underpinned by several favorable factors as follows: 

First, the effects of incremental pro-growth policies will continue to take hold. As the real estate and capital markets recover, and policies aimed at expanding domestic demand are implemented, both consumer confidence and investment sentiment will improve. Second, the impact of economic reforms will become more apparent. With the deepening of structural reforms, the efficiency of resource allocation and the underlying drivers of economic development will see further improvement. Third, the effects of economic transformation will accelerate. 

As the innovation-driven development strategy and new urbanization efforts keep advancing, new quality productive forces will emerge, and the pace of economic restructuring will quicken.

The country should remain acutely aware of the new challenges and uncertainties that lie ahead for China's economy. On the international stage, the return of Donald Trump could bring some changes to international trade rules, global supply chains, energy and resource distribution, and geopolitical dynamics. 

These developments could heighten the uncertainty and instability of the external environment, and may increase downward pressure on exports. Amid the ongoing reshaping of the global political and economic order, new strategic opportunities may also pop up.

Domestically, with major changes taking place in the balance of properties supply and demand, in the levels of industrialization and urbanization, and in the structure and size of the population, coupled with the impact of a new round of "Trump shocks," downward pressure on the economy may increase. 

However, these challenges are intrinsic to the process of development and transformation. They are the necessary obstacles China must overcome in its pursuit of high-quality economic development and the realization of the great rejuvenation of the Chinese nation.

In response to the evolving global landscape, the country's macroeconomic policies should be strengthened, mindsets should evolve and new approaches should be devised. The Central Economic Work Conference called for the implementation of more proactive and impactful macro policies. This decision stemmed from a thorough evaluation of China's current economic stage and the changing external environment.

Wang Changlin Photo: Courtesy of CASS

Below are several key recommendations for innovating macroeconomic control methods and accelerating the transformation of China's economic development model:

First, boosting consumption. While supply-side structural reforms remain central, it is crucial to foster new quality productive forces that can meet and create new demand. At the same time, it is important to promote demand-side structural reforms, accelerate the establishment of a consumption-oriented macroeconomic governance mechanism, and implement a more forceful strategy to expand domestic demand by stimulating consumer spending, in order to stabilize the economy.

Secondly, boosting investment in people and their livelihoods. Social reproduction encompasses both the reproduction of goods and of children. China needs to move beyond the traditional focus on "investment in things" and instead foster a more integrated approach that connects investment in physical assets with investment in human capital. 

Third, strengthening macroeconomic governance. The factors influencing China's economic development are both economic and non-economic. Therefore, it is crucial to accelerate the improvement of the macroeconomic governance system. Non-economic policies should be incorporated into the assessment of macroeconomic policy coherence, generating a unified effort to promote high-quality growth.

Fourth, leveraging reform to invigorate vitality. While effective macroeconomic control policies help to smooth economic fluctuations and buy time for reform, they do not obviate the need to deepen reforms. Only by accelerating reform in key areas can the country fundamentally boost the growth rate and enhance the endogenous momentum for sustained development.

The year 2025 will be a pivotal one for further deepening comprehensive reforms. The Central Economic Work Conference called for giving full play to the leading role of economic system reform and ensuring that landmark reforms are effectively implemented. This is of crucial importance for unleashing economic vitality and development potential. Amid rising global protectionism, China's relatively high economic growth rate, stable policy environment, and firm commitment to expanding high-level opening-up create a unique "stability dividend" for both Chinese and foreign businesses.

History has shown that China's economy has grown stronger by continuously overcoming the challenges. As long as we fully leverage our advantages, seize historical opportunities, tap into the potential, face difficulties head-on and maintain our confidence, no obstacle - whether internal or external - can halt China's march toward modernization. 

The author is vice president of the Chinese Academy of Social Sciences. [email protected]