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Stable Growth Policy under Structural Transformation in 2025

Apr 07-2025   



The year 2025 marks the final year of China's 14th Five-Year Plan. Faced with the dual challenges of profound adjustments in the global economic landscape and the arduous task of domestic structural reforms, the National People's Congress and the Chinese People's Political Consultative Conference (collectively known as the "Two Sessions") have identified stabilizing growth, expanding domestic demand, and promoting innovation as core issues. Against this backdrop, the 71st session of the China Economic Observation Report (CEO) was held on March 16, 2025, at the B101 Lecture Hall in Chengze Garden, National Development Research Institute, Peking University. The theme of the event was "Stabilizing Growth Policies under Structural Transformation and Interpretation of the 2025 Two Sessions."

 

Huang Yiping, Boya Distinguished Professor at Peking University, Dean of National School of Development, Dean of Institute of South-South Cooperation and Development at Peking University, first delivered the speech. He said that China's economy is currently facing the dual challenges of structural transformation and cyclical fluctuations. That is, the traditional growth momentum continues to weaken, and the lack of succession in emerging industries forms a structural contradiction. Meanwhile, weak domestic demand intensifies the pressure of cyclical fluctuations. His report also proposes a stable-growth policy framework that synergizes macro and industrial policies and stresses the stable growth remains very important. It then analyses the reasons for the slowdown in economic growth from three aspects: the business cycle, industrial structure, and development trend. Professor Huang’s report concludes by stressing that local governments have played an important role in economic reform but need to further transform themselves in the future to better adapt to the demands of market-oriented reform.

 

Zhang Bin, a researcher at the Institute of World Economics and Politics of the Chinese Academy of Social Sciences (CASS), spoke on "Controversies and Choices in Expanding Domestic Demand". After an in-depth analysis of why there is a lack of demand and how to understand the lack of demand, he also explored in detail the effects, advantages, and disadvantages of various ways of solving the problem, including stimulating consumption, expanding investment, lowering interest rates, counter-cyclical policies, and structural reform. He said that the two salient features of the demand deficit are market failure and accelerated downturn, while the causes are related to multiple external triggers such as the new coronavirus, market failure, and counter-cyclical fiscal and monetary policy responses. Moreover, consumption and investment growth are not mutually exclusive but highly positively correlated. The difference is that consumption is the decision of hundreds of millions of households and is more endogenous, while investment, especially public investment, is the decision of a few and is more exogenous. As for counter-cyclical policies and structural reforms, the two can complement each other, and counter-cyclical policies should not be rejected altogether.

 

Dr Wu Ge, Chief Economist and Assistant to the President of Cheung Kong Securities, shared his thoughts on "Macroeconomic Targets" from three perspectives. First, if the target for 2025 is to achieve a real GDP growth rate of around 5% while expecting moderate price increases, it will require extraordinary policy measures. Second, while technological progress is evident at the macro level on the supply side, it also has an impact on the demand side, leading to lower prices and thus placing greater demands on the regulation of aggregate demand. Third, in the process of promoting a steady recovery of economic indicators, it is necessary to consider gradual policies and pay attention to the public's views on inventory issues to achieve balanced economic development.

 

Lu Feng, Professor at the Development Fund of the Alumni College of PKU NSD, gave a speech on "Trade Surplus and Rebalancing Requirements in China's '14th Five-Year Plan'". After systematically analyzing the characteristics and causes of the trade surplus, he concluded that domestically, the rapid growth of the surplus in recent years is inconsistent with the "double-cycle" strategic policy of the 14th Five-Year Plan. At the same time, the lack of domestic demand, especially the weakness of final consumption, has become a more prominent contradiction restricting the sustainable growth of the economy. Externally, geopolitical and economic tensions are rising, trade protectionism is increasing, and the US is using tariffs as leverage to pursue unilateral policies. Professor Lu Feng suggested integrating internal and external issues and prioritizing domestic affairs by promoting property recovery, planning public-finance system reform, introducing rural-land and household-registration system reform, and optimizing the allocation of public resources to solve the problem of excessive surplus growth and excessive risks.

Stable Growth Policy under Structural Transformation in 2025

Apr 07-2025   



The year 2025 marks the final year of China's 14th Five-Year Plan. Faced with the dual challenges of profound adjustments in the global economic landscape and the arduous task of domestic structural reforms, the National People's Congress and the Chinese People's Political Consultative Conference (collectively known as the "Two Sessions") have identified stabilizing growth, expanding domestic demand, and promoting innovation as core issues. Against this backdrop, the 71st session of the China Economic Observation Report (CEO) was held on March 16, 2025, at the B101 Lecture Hall in Chengze Garden, National Development Research Institute, Peking University. The theme of the event was "Stabilizing Growth Policies under Structural Transformation and Interpretation of the 2025 Two Sessions."

 

Huang Yiping, Boya Distinguished Professor at Peking University, Dean of National School of Development, Dean of Institute of South-South Cooperation and Development at Peking University, first delivered the speech. He said that China's economy is currently facing the dual challenges of structural transformation and cyclical fluctuations. That is, the traditional growth momentum continues to weaken, and the lack of succession in emerging industries forms a structural contradiction. Meanwhile, weak domestic demand intensifies the pressure of cyclical fluctuations. His report also proposes a stable-growth policy framework that synergizes macro and industrial policies and stresses the stable growth remains very important. It then analyses the reasons for the slowdown in economic growth from three aspects: the business cycle, industrial structure, and development trend. Professor Huang’s report concludes by stressing that local governments have played an important role in economic reform but need to further transform themselves in the future to better adapt to the demands of market-oriented reform.

 

Zhang Bin, a researcher at the Institute of World Economics and Politics of the Chinese Academy of Social Sciences (CASS), spoke on "Controversies and Choices in Expanding Domestic Demand". After an in-depth analysis of why there is a lack of demand and how to understand the lack of demand, he also explored in detail the effects, advantages, and disadvantages of various ways of solving the problem, including stimulating consumption, expanding investment, lowering interest rates, counter-cyclical policies, and structural reform. He said that the two salient features of the demand deficit are market failure and accelerated downturn, while the causes are related to multiple external triggers such as the new coronavirus, market failure, and counter-cyclical fiscal and monetary policy responses. Moreover, consumption and investment growth are not mutually exclusive but highly positively correlated. The difference is that consumption is the decision of hundreds of millions of households and is more endogenous, while investment, especially public investment, is the decision of a few and is more exogenous. As for counter-cyclical policies and structural reforms, the two can complement each other, and counter-cyclical policies should not be rejected altogether.

 

Dr Wu Ge, Chief Economist and Assistant to the President of Cheung Kong Securities, shared his thoughts on "Macroeconomic Targets" from three perspectives. First, if the target for 2025 is to achieve a real GDP growth rate of around 5% while expecting moderate price increases, it will require extraordinary policy measures. Second, while technological progress is evident at the macro level on the supply side, it also has an impact on the demand side, leading to lower prices and thus placing greater demands on the regulation of aggregate demand. Third, in the process of promoting a steady recovery of economic indicators, it is necessary to consider gradual policies and pay attention to the public's views on inventory issues to achieve balanced economic development.

 

Lu Feng, Professor at the Development Fund of the Alumni College of PKU NSD, gave a speech on "Trade Surplus and Rebalancing Requirements in China's '14th Five-Year Plan'". After systematically analyzing the characteristics and causes of the trade surplus, he concluded that domestically, the rapid growth of the surplus in recent years is inconsistent with the "double-cycle" strategic policy of the 14th Five-Year Plan. At the same time, the lack of domestic demand, especially the weakness of final consumption, has become a more prominent contradiction restricting the sustainable growth of the economy. Externally, geopolitical and economic tensions are rising, trade protectionism is increasing, and the US is using tariffs as leverage to pursue unilateral policies. Professor Lu Feng suggested integrating internal and external issues and prioritizing domestic affairs by promoting property recovery, planning public-finance system reform, introducing rural-land and household-registration system reform, and optimizing the allocation of public resources to solve the problem of excessive surplus growth and excessive risks.