MK socks in Dazhou, Southwest China's Sichuan Province on February 19, 2025. Photo: VCG" src="https://www.globaltimes.cn/Portals/0/attachment/2025/2025-02-20/799e9996-f83b-495c-85eb-0f35b50ddcc5.jpg" />

Automated robotic arms operate on an assembly line at Sichuan Star Sodium Battery Co, in Dazhou, Southwest China's Sichuan Province on February 19, 2025. Photo: VCG

 
In 2025, China's economy will continue to overcome several challenges, notably the uncertainties in the external environment. Nevertheless, the current foundation of the Chinese economy remains strong, characterized by numerous advantages, robust resilience, and significant potential.

The government's supportive policies and the economic trend of continuous improvement have not changed. These advantages encompass China's distinctive institutional strengths, a vast domestic market, a complete industrial supply chain, and the ongoing enhancement of human resources in quality.

Despite the challenges, the Chinese economy is expected to sustain a strong growing impetus, fully capitalize on its advantages, and convert those advantages into effective economic growth.

The Central Economic Work Conference held in December 2024 set the basic goals for economic work in 2025. The meeting noted that, for this year, it is a must to maintain steady economic growth, keep employment and prices generally stable, ensure a basic equilibrium in the balance of payments, and increase residents' incomes in step with economic growth.

The economic goal is based on a scientific and comprehensive assessment of the economic situation in 2025, taking into account the challenges and reflecting the long-term positive development trends.

In the face of challenges, the focus will be loomed in on "stability," which means stabilizing growth, employment, prices and the international balance of payments. Regarding this main line of work, the key issue is how to transform the long-term positive trends of China's economy into tangible achievements in economic development through introducing new and innovative ideas.

During the 14th Five-Year Plan period (2021-25), China's economy entered a stage marked by deeper structural transformation. The sources of risk have become more complex, necessitating a high level of coordination between development and economic security to ensure the long-term stability and sustainability of the Chinese economy.

This requires maintaining a reasonable growth rate while achieving a high-level balance between economic growth quality and total volume expansion.

In 2025, China's economic work needs to adhere to the guiding principles of seeking progress while maintaining stability, and promoting economic stability through progress. However, relying solely on conventional methods will not yield the anticipated results. To effectively tackle emerging challenges, China needs to engage in proactive efforts and implement more dynamic and effective policies.

The Central Economic Work Conference underscored the importance of upholding fundamental principles and breaking new ground in 2025. In light of new economic changes, achieving progress while maintaining stability necessitates the exploration of unconventional ideas, the development of innovative tools, and the expansion of the policy toolbox.

First, new ideas will help make fiscal policy more proactive and effective. The Central Economic Work Conference proposed the government raise the deficit-to-GDP ratio in 2025 to ensure that fiscal policy is continuously effective and more impactful. Raising the deficit-to-GDP ratio is not just about strengthening the fiscal policy; it also represents a shift in thinking.

Second, monetary policy needs to be kept moderately accommodative.

The Central Economic Work Conference introduced innovations in the approach to monetary policy. On the one hand, the positioning has become more proactive, shifting from a prudent stance to a moderately accommodative one. On the other hand, considering that the Chinese economy is undergoing a deep structural transformation, financial risks must be taken seriously. Therefore, decisions regarding interest rate cuts need to be more cautious in order to support a smooth economic transition and ensure financial stability.

Third, China needs to implement a well-coordinated policy combination. The Central Economic Work Conference once again emphasized the importance of strengthening policy coordination, a point that was repeatedly highlighted in the conference. On the one hand, China's policies involve multiple goals, tools and departments. This requires efficient coordination among different departments. On the other hand, it is essential to develop new policy tools and further streamline the transmission mechanism to effectively implement pro-growth policies.


The author is deputy dean of the School of Economics at the Renmin University of China and a member of the China Macroeconomy Forum (CMF). The article was excerpted and compiled from an article from the CMF. [email protected]