China put priority on cutting industrial overcapacity in 2016 and 2017 as part of its supply-side structural reforms. In the two years that followed it shifted its focus to deleveraging and risk prevention. More recently，policies have been adjusted once again. The statement of the economic work conference in December of 2019 implies that China has become more focused on buttressing the weak links in the economy.

The latest shift is based on the changing situation in the reform program. The economic work conference emphasized the importance of the three critical tasks of preventing risk and addressing poverty and pollution. It also reiterated the government's resolve to keep employment，the financial sector，foreign trade，foreign and domestic investments，and expectations stable. According to the economic work conference，there has been progress in the three critical tasks，particularly guarding against potential risks. With its generally healthy financial system，China is now much more capable of deflecting serious economic risks.

The effort to reduce leverage in the economy has been effective. The rapid build-up in macro level leverage has been curbed，as stated by Vice Premier Liu He at the Lujiazui Forum in Shanghai in June，2019. Statistics from the National Finance and Development Laboratory of the Chinese Academy of Social Sciences show that the leverage ratio in China's real economy rose more than 10 percentage points a year between 2012 and 2016. The national leverage ratio soared from 177.2% in late 2011 to 240.2% at the end of 2016，up 63 percentage points over the five-year period. Fortunately，the pace has eased since 2017. China saw a macro leverage level of 251.2% at the end of the third quarter of 2019，up 11 percentage points over that three-year period.

The work conference made clear that China needs to continue its effort to keep the leverage ratio under control. That is because there are some unresolved structural issues despite the significant achievements of the recent past. Additionally，more hidden risks have been revealed during the deleveraging process. The economic conference put more focus on strengthening the areas of the economy where there are obvious weaknesses as required by the combination of supply-side structural reform with demand side macro-regulation. It is also the starting point for policy adjustments in the year ahead amid a continuing economic slowdown.

The work conference pointed to the importance of maintaining counter-cyclical macro-economic policies. It emphasized that China needs to enhance the vitality of the economy at the micro level. This is helpful to continuing supply-side structural reform through the process of macro-regulation.

Faced with the mounting challenges at home and abroad，as well as the downward economic pressure，China is most likely to adopt expansionary policies. The concluding statement at the conference shows supply-side structural reforms will proceed in the same direction as the macro policies. That is，China will continue with a shift in focus that addresses the key areas of weakness，though policy adjustments will be made at a reasonable pace. Counter-cyclical expansion will take into consideration the needs of supply-side reforms.

The work conference stressed that fiscal policy and monetary policy need to be coordinated with measures related to consumption，investment，employment，industry and regional development. China will strive to upgrade industry and consumption by channeling investment funds towards the three priority areas of advanced manufacturing，infrastructure，and improving public well-being.

With respect to advanced manufacturing，China will support the development of strategic industries and increase investment in equipment renewal and technological upgrading. At the same time，it will seek to promote the upgrading of traditional industries. Meanwhile，it will encourage the building of advanced manufacturing clusters that can compete on the international stage. It will also seek to improve basic industrial capacity and modernize the industrial chain.

Domestically，the strengthening of weaker segments of advanced manufacturing and strategic industries is critical as downward pressure on the economy makes this an urgent task. From the international side，although tension with the US has eased，China cannot neglect the vulnerability of its scientific and technological sectors，especially advanced manufacturing. In conclusion，the fiscal，monetary，industrial and regional development policies will push in the same direction of developing strategic industry and the advanced manufacturing.  

In regard to improving public well-being，there are two key guidelines.  First，not only the government，but also the market will have a role. The government will take inclusive measures to act as a backstop to guarantee basic needs of disadvantaged groups.  According to the concluding statement of the work conference，the government will strive to maintain employment stability. Efforts include improving the quality and structure of employment，with a focus on helping disadvantaged groups and ensuring a stable job for at least one member of every family. The government will also step up its work concerning public well-being. For example，it will address the issue of providing education for the children of migrant workers. Moreover，the government will guarantee basic necessities. It will ensure that pension payments are made on time and in full. It will speed up efforts to create a national pension fund system. The market，on the other hand，can play a greater part in the reform of services related to medical care and care for the elderly.

More importance will be attached to the care of the elderly and the very young. China will support private nursery services. Additionally，higher-quality tourism and a market-oriented sports and personal fitness industry will be promoted. All of these efforts will contribute to the upgrading of industry and consumption.

As far as infrastructure is concerned，the December conference called for pushing ahead with a number of strategic projects. That includes the Sichuan-Tibet Railway，the communications network，projects that would protect against major natural disasters，as well as the construction of municipal utilities infrastructure，urban parking lots，rural roads，telecommunication facilities and water conservancy.

In January，the Central Commission for Financial and Economic Affairs，in its sixth session，put a new emphasis on environmental protection as well as the development of the Yellow River basin and Chengdu-Chongqing economic corridor. Projects of water conservancy and transport will also be key areas of development. 

Taken together，these efforts can offset weaknesses in the above-mentioned three areas and boost the macro-regulation of the demand side. At the same time it can help with the advancement of supply-side structural reform.

These measures are expected to play an outsized role in China's economic development in 2020. Over the medium to longer-term，other reform and opening-up policies will be rolled out to break down institutional barriers to development.

The author is a researcher at the Institute of World Economy and Politics at the Chinese Academy of Social Sciences，and director of the research department of the China Finance 40 Forum