China’s Economic Outlook: Xi Jinping Calls for Proactive Policies Amidst Slowdown
Chinese President Xi Jinping urged a more proactive macroeconomic policy for 2025, according to state media reports. This proclamation comes as Beijing grapples wiht a slowing economy, the world’s second largest.
speaking at a New Year’s event hosted by the National Committee of the Chinese People’s Political Consultative Conference, Xi emphasized the need for deeper reforms adn “more proactive and effective macroeconomic policies,” as reported by CCTV. This call to action reflects growing concerns about the nation’s economic trajectory.
Navigating Economic headwinds
China’s economy is facing significant challenges. A severe real estate crisis threatens price collapses, while consumer spending remains considerably below pre-pandemic levels. These factors are creating uncertainty for both domestic and international investors.
In response,Beijing has implemented several economic recovery measures in recent months,including interest rate cuts and increased debt ceilings for local governments. However, economists argue that more direct support for consumer spending is crucial for sustained growth. This mirrors similar debates in the U.S. regarding the effectiveness of various stimulus measures.
Earlier in December, Xi pledged to ease monetary policy in the coming year. This commitment signals a potential shift in approach, acknowledging the need for more aggressive intervention to stimulate the economy.
“We must maintain the general guideline based on stability while seeking progress, and accelerate the adoption of a new growth model,” Xi stated in a televised New Year’s address. This statement highlights the government’s strategic focus on long-term economic transformation.
Transitioning to a New Economic Model
Xi acknowledged the pressure on the Chinese economy to transition from older growth models to new ones, citing an uncertain global environment. He expressed confidence in overcoming these challenges through hard work. This transition mirrors similar efforts in developed economies to adapt to technological advancements and global competition.
While Xi reiterated confidence in achieving the official 5% GDP growth target for 2024, emphasizing the development of “a new quality of productivity,” some analysts remain skeptical. Official growth figures are typically released in January, leaving room for potential revisions.
The International Monetary Fund (IMF) projects China’s economic growth at 4.8% in 2024, slightly lower than the official target, and further declining to 4.5% in 2025. IMF Managing Director Kristalina Georgieva previously warned that growth could fall significantly below 4% without substantial reforms.
Manufacturing and Services Show Signs of Growth
President Xi’s comments followed the release of December’s manufacturing purchasing managers’ index (PMI), which showed a third consecutive month of growth. the PMI reached 50.1 points, slightly down from November’s 50.3.A reading above 50 indicates expansion, while a reading below signifies contraction.The non-manufacturing PMI, reflecting the services sector, also saw enhancement, reaching 52.2 points compared to 50.0 in November.
These positive indicators offer a glimmer of hope, but the overall economic picture remains complex and requires continued monitoring. The coming months will be crucial in determining the effectiveness of Beijing’s policies and the overall trajectory of the Chinese economy.
