The coming year is expected to be challenging for the Chinese economy, mainly due to weak domestic demand and deflationary pressures. A three-year downturn in the housing market has exacerbated these issues, significantly impacting consumer sentiment. Additionally, the ongoing fundamental restructuring of the economy, coupled with a complex geopolitical landscape characterized by multiple global crises and a change in the U.S. administration, necessitates thorough analysis, careful preparation for various scenarios, including unfavorable ones, and identification of possible proactive responses.

Considering the expected complex internal and external shocks, Beijing has formulated several critical policy measures to support its economy in 2025. The new policy measures were announced following the annual Central Economic Work Conference, which sets the economic agenda for each coming year.

The two-day conference in Beijing outlined several key goals. It emphasized that China must maintain steady economic growth in the coming year while ensuring employment and price stability.

New policies primarily focus on stimulating domestic consumption and attracting investment. At the conference, Chinese leaders specifically pledged to "implement more proactive and impactful macro policies" and "expand domestic demand."

Additional tailor-made steps will be adapted to the challenging economic landscape. These measures focus on integrating technological and industrial innovations, stabilizing property and stock markets, and preventing and mitigating risks in critical areas, including those from potential external shocks.

Policymakers agreed on plans to raise the deficit-to-GDP ratio, increase the issuance of ultra-long special treasury bonds and local government special-purpose bonds, and reduce interest rates and reserve requirements for financial institutions, all parts of a more proactive fiscal policy.

The conference announced that China will implement a moderately loose monetary policy in 2025. Interestingly, the last time China loosened its monetary policy was in 2010, when the country was dealing with the aftermath of the global financial crisis.

Most analysts characterized the conference's tone as supportive and realistic regarding the challenges the domestic economy might encounter, particularly concerning uncertainty about external demand.

Beijing has clearly expressed its intention to strengthen support for the private sector. This includes encouraging investment, reducing excessive and counterproductive competition, establishing uniform standards for market operators, and alleviating the pressure that local governments sometimes place on businesses. A special law focused on private sector development is expected to address this and other challenges that impact private companies' self-sufficiency.

Particular attention is paid to "neijuan," a phenomenon in many industries where rat-race irrational competition hinders innovation.

China has set an economic growth target at around 5 percent this year. The Central Economic Work Conference said the country's major annual goals and tasks of economic and social development will be successfully accomplished. Recent indications from Beijing suggest that the government intends to maintain its "around 5-percent" growth target for 2025. However, the precise figure is expected to be revealed following the March meeting of the country's legislature.

Many global investment banks predict a slowdown in China's economic growth for the coming year. Nomura expects China's GDP to grow by 4 percent in 2025, a decrease from the 4.8 percent growth anticipated for this year. Similarly, UBS and Goldman Sachs forecast a growth rate of approximately 4 percent and 4.5 percent, respectively, for next year. J.P. Morgan is somewhat pessimistic, expecting GDP growth to hit 3.9 percent in 2025, mainly due to the expected impact of higher U.S. tariffs.

The forecasts indicate that Beijing must make significant efforts to reach its goals for the upcoming year. However, forecasts from Western institutions in previous years show a trend of pessimism and underestimation of China's economic performance, and this tendency may continue into 2025. Notably, these pessimistic forecasts should motivate the Chinese nation to work even harder and more effectively to achieve its objectives.

Djoomart Otorbaev is former prime minister of Kyrgyzstan, a distinguished professor of the Belt and Road School at Beijing Normal University and author of the book Central Asia's Economic Rebirth in the Shadow of the New Great Game (Routledge, London, 2023)

http://www.bjreview.com/Opinion/Governance/202412/t20241226_800388173.html