China’s Stimulus Policies Now Put Emphasis on Consumption, Expert Says
The recent wave of policies aimed at stabilizing the economy and boosting confidence marks a shift in China’s macroeconomic approach, an expert familiar with monetary policymaking told Caixin.
“The recent policy package isn’t merely a stimulus. Rather, it reflects a major shift in policy logic, combining short-term, demand-boosting measures with a range of reform and structural adjustment plans,” said an expert close to the People’s Bank of China (PBOC).
“A growing consensus is emerging around strengthening demand-side management, with macroeconomic policies shifting from an investment-led focus to a balanced approach that gives equal priority to consumption and investment, with greater emphasis on consumption,” the expert said. “Going forward, as more supportive policies are rolled out, deepening reforms will be essential to significantly expand domestic demand.”
China has in recent months intensified efforts to boost the economy with a series of stimulus measures aimed at supporting the stock market, property sector and consumer spending. On Friday, Beijing announced a five-year, 10 trillion-yuan ($1.4 trillion) package to address local government debt, while indicating further economic support is expected next year.
The expert said that monetary policy would remain supportive, with the central bank confirming this numerous times this year. Although officially termed “prudent,” the policy has been moderately accommodative in practice, he said.
Since early 2024, monetary policy has taken the lead in addressing weak economic expectations and low business confidence. The central bank began the year with broad stimulus measures, including reserve requirement and interest rate cuts to support growth.
By mid-year, the focus shifted to structural adjustments, with a May policy package aimed at easing the property market’s drag on the economy.
In June, the PBOC laid out its new monetary framework. One of the key changes was to move away from quantitative targets such as total social financing and M2 money supply, and put a greater focus on interest rates. Experts said these steps reflect both short-term economic support and a longer-term financial reform agenda.
In late September, the central bank announced a fresh batch of aggressive stimulus measures, followed by an unusual Politburo meeting addressing economic challenges. These moves propelled the benchmark CSI 300 Index to its biggest weekly gain in nearly 16 years.
On Nov. 5, Pan Gongsheng, the PBOC governor, reaffirmed the central bank’s commitment to supporting the real economy, pledging to maintain a supportive monetary policy stance and intensify policy measures.
The expert said the supportive monetary policy stance is unlikely to change in the short term, with strong policy measures expected to continue next year to create a favorable financial environment for stable economic growth and high-quality development.
Incremental policies are set to boost social expectations, market confidence and financing demand, the expert added. As policy effects continue to roll out through loan approvals and credit processes, financial support for the real economy will further strengthen.
During the 15th Caixin Summit, which ended Saturday in Beijing, economists including Liu Shijin underscored that economic stimulus and structural reform should go hand in hand.
“The purpose of stimulus is to create time and space for structural reform,” said Liu, a former deputy head of the State Council’s Development Research Center. “China needs to address the root cause that constrains its domestic demand.”
Xu Lin, chairman of China-US Green Fund and a former official at the National Development and Reform Commission, held a similar view. Addressing domestic consumption problems requires structural reforms, as repeated fiscal and monetary stimulus alone cannot resolve the issue, he said. This is why the domestic demand gap is a long-term challenge, not a short-term or cyclical one.
Contact reporter Han Wei (weihan@caixin.com)
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