The year 2025 is the final year for implementing the 14th Five-Year Plan (2021–2025) and also a critical year for laying a solid foundation for a good start to the 15th Five-Year Plan (2026–2030). At the end of 2024, the Central Economic Work Conference analyzed the economic outlook for 2025 and set the overall direction for macroeconomic policies, highlighting the integration of scientific and technological innovation with industrial innovation. This article reviews the major achievements over the past year, deeply analyzes the increasingly complex domestic and international landscape, and explores how to effectively navigate trajectory of 2025's macroeconomic policies. Fully Acknowledge the Remarkable Economic Performance in 2024

The year 2024 marked a pivotal year for achieving the objectives and tasks set out in the 14th Five-Year Plan. Despite a complicated and challenging landscape marked by mounting external pressures and accumulating domestic challenges, the leadership adoptedcomprehensive measures. On September 26, 2024, the Political Bureau of the CPC Central Committee made a decisive move by rolling out a package of incremental policies, which significantly boosted social confidence. In summary, several key features stand out:

 

First, the economy achieved a sustained recovery. The Political Bureau of the CPC Central Committee meeting on September 26 decisively launched a package of incremental policies. These actions effectively restored social confidence and shifted the trajectory of economic performance. As a result, China's GDP grew by 5.0% year-on-year, thus meeting the annual growth target.

 

Second, new quality productive forces grew steadily. The country's R&D expenditure intensity reached 2.68% for the year. Investment in high-tech manufacturing and high-tech services rose by 7.0% and 10.2%, respectively, outpacing the growth rate of total fixed-asset investment by 3.8 and 7.0 percentage points. The digital economy continued to expand. As of now, China has established over 30,000 basic-level smart factories, more than 1,200 advanced-level ones, and over 230 excellent-level smart factories, which will effectively enable industrial transformation and upgrading.

 

Third, policies to enhance major national capacities, and promote large-scale equipment renewal and consumer goods trade-ins yielded significant results. A total of 700 billion yuan in ultra-long-term special treasury bonds was allocated in 2024 to support 1,465 major projects. An additional 300 billion yuan was earmarked to support large-scale equipment renewal and consumer goods trade-ins.

 

Fourth, foreign trade reached a record high. China made efforts to cultivate new growth drivers in foreign trade. Zero-tariff treatment was granted to products from all least developed countries that have established diplomatic relations with China. The import and export of goods registered relatively fast growth, with the total value reaching 43.8 trillion yuan for the year. Trade in services totaled 7.5 trillion yuan. Total goods trade increased by 5.0% year-on-year, with exports up by 7.1% and imports up by 2.3%.

 

Fifth, risks in key areas of the economy and financial sectors were addressed in an orderly and effective manner. Since the meeting held on September 26 last year, local governments have introduced city-specific policies and actively rolled out a coordinated package of policy adjustments, including lifting restrictions on home purchases, loans, and prices, and lowering mortgage interest rates and down payment ratios. Two new policy tools were introduced: swap facilities for securities, fund, and insurance companies, and special relending facilities for stock repurchases and share increases. Last November, the Standing Committee of the National People's Congress approved an increase of 6 trillion yuan in the local government debt ceiling to replace existing hidden debt, with 2 trillion yuan allocated for 2024. These measures effectively eased local government debt risks and led to notable reductions in financing costs. Steady progress was made in advancing reforms and resolving risks in local small and medium-sized financial institutions.

 

Sixth, steady progress was made in ensuring people's wellbeing. Positive results were achieved in stabilizing employment and promoting income growth, with 12.56 million new urban jobs added for the whole year. The national urban surveyed unemployment rate averaged 5.1%, a decrease of 0.1 percentage points from the previous year. A total of 1.8 million units (rooms) of subsidized housing for sale, government-subsidized rental housing and public rental housing were built and made available. The national scholarship and grant standards were raised and expanded, with loan amounts increased and interest rates reduced, benefiting more than 34 million students.

 

In summary, China's economy has delivered an impressive performance. With a 5% economic growth rate, China ranks among the top economies in the world, contributing around 30% to global economic growth and continuing to serve as the largest engine of global economic expansion.

 

Gain an Insight of the Current Intricate Domestic and International Circumstances

Regarding the domestic and international settings, the negative impacts of evolving external environmental changes have deepened, and China's economic operations continue to face numerous difficulties and challenges. It is important to face these challenges head-on, maintain confidence, and strive to convert positive factors from all aspects into tangible achievements.

 

Challenges Arising from Profound Changes in the External Environment

An increasingly complex and severe external environment may exert a greater impact on China in areas such as trade, science, and technology.

 

Multiple sources of geopolitical tension persist. These tensions persist as a major driver of volatility in global market expectations and investment confidence, leading to heightened risks of international market fluctuations. First, the Russia-Ukraine conflict remains caught in a dual dilemma of battlefield stalemate and diplomatic impasse. Second, the Israel-Palestine conflict has further escalated, with its complexity and potential spillover effects as significant challenges for global governance. Geopolitical conflicts are showing signs of becoming protracted, and it is unlikely to find a fundamental resolution for both the Russia-Ukraine conflict and the situation in the Middle East in the near future.

 

Global economic growth continues to be sluggish. According to the International Monetary Fund (IMF), the global economy is projected to grow by 2.8% in 2025, significantly lower than the historical average of 3.7% from 2000 to 2019.

 

Trade frictions have intensified noticeably. Rising unilateralism and protectionism have undermined the multilateral trading system, increased tariff barriers, disrupted the stability of global supply chains, and impeded the smooth functioning of the international economic cycle.

The RMB exchange rate remains under pressure. The past year saw the RMB exchange rate fluctuating amid complex market conditions, yet keeping notable resilience. Recently, exchange rate volatility has increased sharply due to US tariffs. In the near term, the RMB exchange rate is expected to remain relatively stable, with a low probability of sustained and significant depreciation.

 

Prominent Contradictions Faced Domestically

Price levels remain depressed. While some positive changes have emerged in the price situation, the overall rebound remains weak. In 2024, the Consumer Price Index (CPI) rose by just 0.2% year-on-year, marking the lowest level since 2010. In January 2025, CPI rebounded to 0.5%, mainly driven by seasonal factors, but declined again by 0.7% in February and dropped 0.1% year-on-year in March. Achieving the annual CPI growth target of 2% will be a considerable challenge. The Producer Price Index (PPI) fell by 2.2% year-on-year in 2024, remaining in negative territory for 30 consecutive months since October 2022. Since the second quarter of 2023, the GDP deflator has posted year-on-year negative growth for eight straight quarters. Price levels are intertwined with not only the macroeconomy but also the behaviors of the general public. Prolonged low prices may dampen income expectations, affect public sentiment, weaken consumption and investment activity among market participants, and add pressure on tax revenue growth.

 

The adjustment of the real estate market has not yet concluded. To stabilize the real estate market, various regions have also implemented city-specific policies, and their effects are gradually becoming evident. Data released by the National Bureau of Statistics shows that housing market transaction activity increased in March 2025. However, it should be noted that these improvements are still in the early stages. In some regions, the real estate market remains in adjustment, with downward pressures persisting. In particular, the risk of defaults by real estate companies continues to evolve which will face a higher debt repayment scale in 2025 than in 2024.

 

The headwind for enterprises persists, but some sectors have thrived. For instance, driven by large-scale equipment upgrading policies, the specialized equipment manufacturing industry saw a 36.7% year-on-year profit increase in 2024. The trade-in policies in consumer sectors such as home appliances, home decoration, and kitchen and bathroom products have proven effective, leading to rapid profit growth in related industries. However, the total profit of industrial enterprises above designated size nationwide decreased by 3.3% year-on-year in full-year 2024, followed by a further 0.3% decline in the first two months of 2025. The issue of overdue accounts receivable in enterprises remains severe.

 

Market expectations have not yet fully recovered. Economic activity is showing signs of recovery, which has boosted confidence in various sectors. However, market expectations for future economic growth remain pessimistic. In particular, credit demand has yet to show a meaningful recovery.

 

The issues mentioned above collectively point to the primary challenge identified by the Central Economic Work Conference, which is insufficient domestic demand, particularly weak consumption. In 2024, the year-on-year growth rate of social retail sales declined by 3.7 percentage points from the previous year, while per capita consumption expenditure grew by 5.1%, a significant slowdown of 3.9 percentage points from the previous year's growth rate. The average consumption propensity was 68.3%, still below the pre-pandemic level of over 70%. Notably, social retail sales in Beijing and Shanghai experienced negative growth of 2.7% and 3.1%, respectively.

At the same time, it must be acknowledged that China's economy is underpinned by a stable foundation, multiple advantages, strong resilience, and great potential. Looking ahead, the "combination" of macroeconomic policies has proven effective, reform and opening-up have been comprehensively deepened, and social expectations have been bolstered, which has laid a solid foundation for achieving the annual economic growth target of around 5%.

 

Scientifically Comprehend Issuing the Direction of 2025 Macroeconomic Policies

Implement a more proactive fiscal policy. We will coordinate the allocation of fiscal resources, including revenues and bond issuing, to ensure fiscal policy provides stronger support. This year, the deficit-to-GDP ratio is expected to be set at around 4%, up 1 percentage point from last year. The deficit is projected at 5.66 trillion yuan, up 1.6 trillion yuan from last year. General public budget expenditures will reach 29.7 trillion yuan, an increase of 1.2 trillion yuan from the previous year. The government plans to issue 1.3 trillion yuan of ultra-long-term special treasury bonds, up 300 billion yuan from last year. Additionally, 500 billion yuan in special treasury bonds will be issued to support capital replenishment for large state-owned commercial banks. Special bonds for local governments will be arranged at 4.4 trillion yuan, up 500 billion yuan from last year. These funds will primarily be used for investment and construction, land acquisition, purchasing existing commodity housing, and settling overdue payments from local governments to businesses. This year, the total increase in government debt is expected to reach 11.86 trillion yuan, an increase of 2.9 trillion yuan compared to the previous year, indicating a significant jump in fiscal expenditure intensity.

 

Compared to major developed economies, China's deficit ratio still has considerable room for borrowing, which provides fundamental support for the growth of public investment. In fact, in response to the cyclical changes in the macroeconomy, increasing the deficit ratio and strengthening counter-cyclical adjustment are common practice worldwide.

 

Adopt a moderately accommodative monetary policy. The People's Bank of China (PBOC) will give full play to both the aggregate and structural functions of monetary policy tools. PBOC will timely lower the required reserve ratio and interest rates to maintain liquidity, ensuring that the growth in social financing and adequate money supply is consistent with the objectives of economic growth and overall price stability. The central bank will continue to optimize and innovate structural monetary policy instruments to better support the sound development of the real estate and capital markets, while intensifying support for technological innovation, green development, consumption recovery, and the growth of private enterprises and small and micro businesses.

 

Strengthen better policy coordination. The government will strengthen the coordination among fiscal, monetary, employment, industrial, regional, trade, environmental, and regulatory policies, and ensure better alignment with reform and opening-up measures to create stronger synergy among policies. It will improve and make full use of the evaluation mechanism for ensuring consistency in the orientation of macroeconomic policies. The government will ensure the prompt introduction and implementation of policy measures wherever possible, taking early action rather than late, so as to enhance policy effectiveness. Efforts will also be made to strengthen vertical coordination between central and local governments as well as horizontal collaboration across departments.

 

Unleashing Domestic Demand Potential

This year, the government is expected to make comprehensive domestic demand expansion its top priority, with a focus on vigorously boosting consumption and improving investment efficiency. In particular, confronting ongoing challenges from trade frictions, the government will work to strengthen the integration of consumption and investment, accelerate efforts to address weaknesses in domestic demand, with a focus on consumption, and ensure that domestic demand serves as the primary engine of economic growth and a key anchor for stability.

 

The government will launch special initiatives to boost consumption, focusing on measures to enhance spending power, enhance the supply of quality products and services, and improve the consumption environment. First, personal income growth will be promoted through a variety of channels. Second, a total of 300 billion yuan in ultra-long-term special treasury bonds will be issued to support consumer goods trade-in replacement. Third, policies to boost consumption will be incorporated into the framework of structural monetary policy support. Fourth, excessive restrictions on consumption will be lifted. Efforts will be made to improve the vacation system and ensure its effective implementation. Fifth, China will increase the diversified supply of elderly care and childcare as well as health, disability, and domestic services by easing access, reducing restrictions, and improving supervision in these sectors. Sixth, policies on duty-free shops will be refined to expand inbound consumption. China will turn a number of cities into international consumption centers and improve county-level business system. Seventh, well-designed systematic measures will be taken to grant urban household registration to rural migrants. Moreover, China will ensure that they have full access to basic public services in their place of residence. Eighth, the three-year action plan to improve the consumption environment will be carried out in depth.

 

Expand effective investment. China will accelerate a number of key projects, complete the construction of all major projects launched under the 14th Five-Year Plan, and initiate early planning for major projects under the 15th Five-Year Plan. First, in 2025, 735 billion yuan will be earmarked in the central government budget for investment, representing a 35 billion yuan increase from the previous year. Second, China will optimize the utilization of ultra-long-term special treasury bonds, increase ultra-long-term loans and other types of financing support, ensure greater support for the implementation of major national strategies and security capacity building in key areas, and extend the scope of large-scale equipment renewal and consumer goods trade-ins. Third, to improve the management mechanism of special-purpose bonds, China will implement a negative list for investment sectors and delegate project review and approval authority. The pilot program of "self-review and self-issuance" will be implemented in some provinces and cities. The government will establish a regular mechanism for project applications and conduct reviews on a quarterly basis. Fourth, to support and encourage the development of private investment, the government will establish a regular mechanism for promoting projects to private capital. Fifth, investment in the service sector will be scaled up.

 

Take prudent steps to defuse local government debt risks. China will continue to defuse debt risks through development and pursue development amid a debt-risk-mitigation. To this end, the government will improve and implement a comprehensive package of debt risk mitigation measures. In addition, China will refine debt evaluation and control measures while timely updating the list of high-debt-risk regions to create new investment space. Categorized and targeted measures will be adopted to effectively restructure hidden local government debts. A certain portion of newly issued local government special-purpose bonds will continue to be allocated for capital injection of government-managed fund budgets and support local governments in defusing debt risks mitigation.

 

Stabilize Foreign Trade and Investment

Stabilizing foreign trade and investment remains a crucial task this year, requiring further expansion of high-standard opening-up and stabilizing foreign trade and investment.

 

Ensure stable development of foreign trade. Steps will be taken to actively explore diversified markets, foster new trade channels and modalities, and strive to keep the fundamentals of foreign trade stable. It will make full and effective use of all relevant policies, ensure better alignment between domestic standards and international norms, build platforms for high-quality foreign trade products to enter the domestic market, cultivate self-owned brands among foreign trade enterprises, and establish mechanisms to directly communicate policies to businesses. The government will steadily promote the integrated development of domestic and foreign trade. Financial services such as financing and settlement will be improved. The conversion of export credit insurance, and more support will be provided for enterprises to participate in and organize exhibitions abroad. Import and export tax policies, including tariffs, will be refined. Cross-border e-commerce will be promoted to penetrate diversified markets. Innovation in trade in services will be encouraged to expand imports of quality services. China will host major trade events to high standards, such as the China International Import Expo (CIIE), the China Import and Export Fair (Canton Fair), the China International Fair for Trade in Services (CIFTIS), the Global Digital Trade Expo (GDTE), and the China International Consumer Products Expo (CICPE).

 

Vigorously encourage foreign investment. China will promote the orderly opening-up of sectors such as the internet services and cultural industries, and expand pilot programs for opening-up in services sectors, including telecommunications, health care, and education. Foreign investors will be encouraged to increase their reinvestment in China and the government will expedite the launch of landmark foreign investment projects. China will accelerate the implementation of key policies for the Hainan Free Trade Port, improve opening-up and development policies for economic development zones, and promote the upgrading of comprehensive bonded zones.

 

Ensure Stability in the Real Estate and Equity Markets

Ensuring stability in the real estate market and stock markets remains a top priority of 2025's economic work. First, city-specific policies will be adopted to relax property transaction restrictions, with a view to consolidating the outcomes of policy coordination across departments. The effects of interest rate cuts, increased credit supply, and tax reductions will be fully unleashed to tap the potential of both fundamental and improvement-oriented housing demand. Second, efforts will be intensified to redevelop urban villages and renovate old and dilapidated houses.

 

Deepen comprehensive reforms for investment and financing in the capital market. The government will encourage the entry of long- and medium-term capital into the market, and improve market stabilization mechanisms. Procedures for stock issuance and listing and for enterprise merger, acquisition, and restructuring will be reformed and improved, and the development of multilevel bond markets will be accelerated.

 

Stabilize Expectations and Boost Economic Vitality

Effectively energize the vitality of market entities. China will unswervingly consolidate and develop the public sector, and unswervingly encourage, support, and guide the development of the non-public sector. First, China will complete initiatives to deepen and upgrade the state-owned enterprise reform, and implement initiatives on relocating and restructuring the state-owned sector. Second, solid steps will be taken to boost the growth of the private sector, and effectively protect the legitimate rights and interests of private enterprises and entrepreneurs in accordance with the law. Third, efforts will be intensified to settle overdue payments owed to enterprises.

 

Promote the Integrated Development of Scientific and Technological Innovation and Industrial Innovation

 

This year's key task is to develop new quality productive forces in light of local conditions and accelerate the development of a modernized industrial system, with a focus on promoting the integrated development of scientific and technological innovation and industrial innovation.

 

Foster emerging industries and future industries. In order to promote orderly industrial development and healthy competition, China will improve coordination and planning of industries and strengthen monitoring and early warning of overcapacity. China will advance tiered development of innovative enterprises, promote the growth of small and medium-sized enterprises that use specialized, refined, distinctive, and innovative (SRDI) technologies to produce novel and unique products, and support the development of "unicorn"and "gazelle"companies. These efforts will enable more enterprises to take the lead in new sectors and frontiers.

 

Promote the upgrading of traditional industries. Efforts will be stepped up to advance industrial foundation reconstruction and major technology and equipment reengineering.

 

Unleash the creativity of the digital economy. Under the AI Plus initiative, China will support the extensive application of Large Models and vigorously develop new-generation intelligent terminals and smart manufacturing equipment. Basic data systems will be improved at an accelerated pace, and cross-border data flows will be promoted and regulated. China will promote the healthy and well-regulated development of the platform economy.

 

Improve People's Livelihood

Upholding a people-centered approach, economic policy will shift its focus more toward benefiting people's livelihood and stimulating consumption. More financial resources will be directed toward "investing in people" and public services. Efforts will be made to expand employment, increase household income while easing burdens for households, and strengthen consumption incentives, thereby fostering a virtuous cycle of economic growth and livelihood improvement.

 

Strengthen fiscal capacity at the local level. Transfer payments from the central government to locals will be further increased. In 2025, total transfer payments are set at 10.3415 trillion yuan, representing a year-on-year increase of 8.4%. China will also further reform the fiscal, taxation, and financial systems. It will accelerate the collection of excise tax on some items levied downstream in the production-to-consumption chain, with collection authority delegated to local governments, thus placing more fiscal resources at their disposal. Government staffing levels will be strictly controlled. China will improve the standards and foundational institutions for technology finance, green finance, inclusive finance, pension finance, and digital finance.

 

Strengthen basic medical and health networks. China will improve the conditions of hospital wards. It will refine the policy for centralized procurement of medicines, improve pricing mechanisms for medicines, draw up a medical insurance formulary for innovative drugs, and support the development of innovative drugs. Government subsidies for basic medical insurance for rural and non-working urban residents will be raised by a further 30 yuan per person to an annual standard of 700 yuan per person, and subsidies for basic public health services will be increased by 5 yuan per person. In 2025, the central government will budget 432.9 billion yuan to support the increase in the subsidies for basic medical insurance for urban and non-working urban residents. The subsidies for basic public health services will be further increased to 99 yuan per person per year.

 

In summary, this year marks the final year for implementing the 14th Five-Year Plan and a critical year for further deepening reform comprehensively. China's economy is underpinned by a stable foundation, multiple advantages, strong resilience, and great potential. The supporting conditions and fundamental trends for long-term sound economic development have not changed, and the fundamental trend of high-quality development continues. In short, favorable factors outweigh unfavorable ones.

 

YIN Yanlin is the Vice Chairman of the Economic Committee of the 14th National Committee of the Chinese People's Political Consultative Conference