Beijing’s economic meetings hint at lack of plan to tackle economic crisis

  1   Beijing’s economic meetings hint at lack of plan to tackle economic crisis

  Non-CCP personages economic symposium

Dec. 6
The CCP Central Committee held a symposium with representatives from non-CCP organizations (All-China Federation of Industry and Commerce, various democratic parties, etc.) to solicit opinions and suggestions on the economic situation in 2024 and the economic work of 2025. According to state media reports, the leaders of the non-CCP organizations who attended the symposium said that they “fully agree with the CCP Central Committee’s analysis and assessment of the current economic situation, as well as its planning and considerations for the economic work of 2025.”

Xi Jinping presided over the symposium and delivered an important speech. Key points in Xi’s speech include:

• Economic work of 2025 must “fully implement the spirit of the 20th Party Congress, the Second Plenum, and the Third Plenum of the 20th Central Committee.”
• This year, despite facing a more complex and challenging international and domestic environment, the Central Committee managed to withstand pressure and overcome difficulties, ensuring that China’s economic performance remained generally stable with progress amid stability and the 2024 targets would be successfully achieved.
• Successfully managing economic work of 2025 first requires firm confidence in victory.
• China’s economy has a stable foundation, many advantages, strong resilience, and great potential. The long-term positive supporting conditions and basic trends have not changed.
• CCP officials should maintain strategic composure, actively shape a favorable external environment, stay steadfast in handling domestic affairs, and turn various positive factors into tangible development results.
• Accomplishing the economic goals of 2025 would require the joint efforts and hard work of the entire Party and society.
• Difficulties and challenges arise each year, but the CCP has always grown stronger through trials and tribulations, thriving amid storms and tests.

Xi also made three expectations of non-CCP personages:

• Improve political standing and assist the Party and government in doing a good job in economic work. Guide members (of non-CCP organizations) and the public to take a comprehensive and dialectical view of the economic situation and broader development trends, sing the main theme (唱響主旋律, i.e. promote what Party Central wants), and spread positive energy.
• Utilize the advantage of having a pool of talent to actively contribute ideas and efforts towards the Central Committee’s decision-making.
• Strengthen the construction of leadership and personnel teams, and severely punish (嚴懲不貸) any corruption identified.

  Politburo meeting on economic work and anti-corruption

Dec. 9
The Politburo held a meeting to analyze and study the economic work of 2025, review reports from the Central Commission for Discipline Inspection and the National Supervisory Commission, as well as arrange Party conduction and anti-corruption work for the next year. Xi Jinping presided over the meeting.

The meeting concluded that China’s economy appears to face no significant issues under Xi’s leadership, according to state mouthpiece Xinhua. The meeting described the Chinese economy as operating “generally stable with progress amid stability.” Also, China’s economic strength, technological capabilities, and comprehensive national power were said to be “continuously improving”; new productive forces were “steadily developing”; reform and opening up was “continuously deepening”; and risks in key areas were being “addressed in an orderly and effective manner.” The meeting further expressed confidence in “smoothly achieving” the 2024 economic growth targets.

The meeting stressed that economic work of 2025 should be guided by “Xi Jinping Thought” and must fully implement the spirit of the 20th Party Congress, as well as the second and third plenary sessions of the 20th Central Committee.

The meeting outlined key priorities for next year’s economic work:

• Efforts should be made to “stabilize the property and stock markets, prevent and defuse risks in key areas, and mitigate external shocks while stabilizing expectations.”
• A more proactive fiscal policy and moderately loose monetary policy should be implemented, and extraordinary counter-cyclical adjustments should be strengthened.
• Vigorously stimulate consumption, improve investment efficiency, and comprehensively expand domestic demand.
• Effectively prevent and defuse risks in critical areas. Firmly hold the bottom line of preventing systemic risks from breaking out.
• Strengthen the Party’s leadership over economic work.

The meeting said that the anti-corruption authorities, under the “strong leadership” of Party Central with Xi Jinping at the core, have deeply studied and implemented “Xi Jinping Thought,” and particularly his views on the Party’s “self-revolution.” This has driven new achievements in anti-corruption work.

The meeting added that anti-corruption efforts must continue to be guided by “Xi Thought” and aligned with Xi’s political programs, while a high-pressure stance against corruption must be maintained. Anti-corruption agencies should also focus on strengthening the “two safeguards” (resolutely safeguard Xi’s core position in the Party and the Party Central’s “quan wei” and centralized, unified leadership) through political oversight.

  State media lauds China’s economy under Xi

Dec. 11
State mouthpiece Xinhua launched a featured column titled, “Focus on China’s Economy — A Vibrant and Dynamic China,” which appeared to promote positive narratives about the Chinese economy. The column contained a lengthy commentary piece titled “Critical Decisions at a Critical Juncture — How the Party Central with Comrade Xi Jinping at the Core is Steering China’s Economic Ship Through Turbulent Waters.”

The commentary said that China is currently at a crucial stage of accelerating its transformation and upgrading, and striving to advance high-quality development. Also, China is at a key moment in comprehensively promoting the construction of a strong nation and the great rejuvenation of the Chinese nation through Chinese-style modernization.

The commentary added that “critical moments require critical decisions,” and in the face of various risks, challenges and uncertainties, Party Central with Comrade Xi Jinping at the core has taken overall command. The Xi-led Party Central has demonstrated courage and responsibility, united and led the whole Party and people of all ethnic groups across the country to overcome difficulties, persevere through hardships, and steer China’s economic ship forward fearlessly through stormy seas.

  Central Economic Work Conference

Dec. 11 to Dec. 12
The Central Economic Work Conference was held in Beijing. The meeting was attended by all members of the Politburo Standing Committee, senior officials from the Party, government, military, and the heads of various departments and commissions.

According to state media reports, Xi Jinping delivered a speech at the meeting summarizing the economic work of 2024, analyzing the current economic situation, and outlining the economic tasks for 2025.

The meeting noted that in the face of complex and severe challenges such as increased external pressures and rising internal difficulties, the CCP authorities under Xi’s leadership responded “calmly and comprehensively” and are “about to successfully achieve” the economic growth target.

The meeting described the developments over the past year as “extraordinary” and the achievements as “encouraging.” In particular, the “decisive deployment” of a package of incremental policies at the Politburo meeting on Sept. 26 “effectively boosted social confidence” and “led to a significant economic rebound.”

The meeting acknowledged that China’s economic operations still face numerous difficulties and challenges. However, the meeting noted that China’s “economic foundation is stable, its advantages are abundant, its resilience is strong, and its potential is vast, with the conditions and fundamental trend for long-term growth unchanged,” and attributed this to the “centralized and unified leadership of Party Central.”

The meeting said that officials should take “Xi Jinping Thought” as a guide for economic work of 2025 and fully implement the “spirit of the 20th Party Congress, as well as the second and third plenary sessions of the 20th Central Committee.”

The meeting also offered more specifics to the policies outlined at the Dec. 9 Politburo meeting. Key policies of interest include:

More proactive fiscal policy

• Increase the fiscal deficit ratio.
• Strengthen fiscal expenditure intensity and ensure funding for key areas.
• Issue more ultra-long-term special government bonds.
• Expand the issuance and use of local government special bonds, broadening the scope of investment and use as project capital.
• Place greater emphasis on improving the people’s livelihood, promoting consumption, and enhancing sustainability, while safeguarding the “three guarantees” (people’s livelihood, wages, and grassroots operations) baseline at the grassroots.
• Party and government organs must adhere to frugality.

Moderately loose monetary policy

• Adjust the reserve requirement ratio and interest rates at appropriate times to maintain ample liquidity.
• Keep the renminbi exchange rate basically stable at a reasonable and balanced level.
• Explore expanding the macroprudential and financial stability functions of the central bank, innovate financial tools, and maintain financial market stability.

Promoting consumption

• Implement special initiatives to stimulate consumption.
• Appropriately increase the basic pension for retirees as well as urban and rural residents, and increase fiscal subsidies for urban and rural residents’ medical insurance.
• Intensify and expand the implementation of the “two new” policies (large-scale equipment upgrades and the replacement of old consumer goods with new ones).
• Innovate diversified consumption scenarios.
• Provide greater support for the “two key” projects (major national strategies and critical areas of safety capacity building).
• Appropriately increase investments within the central government budget.
• Strengthen coordination between fiscal and financial policies to effectively use government investment to drive social investment.
• Plan in advance major projects under the 15th Five-Year Plan.
• Vigorously promote urban renewal.
• Launch a special initiative to reduce logistics costs across society.

Preventing and defusing risks in key areas

• Stabilize the real estate market and halt its decline.
• Control the supply of new land for real estate development.
• Advance the disposal of existing unsold housing (i.e. step up government acquisition of current housing stock).
• Prudently handle risks in small and medium-sized local financial institutions.
• Enhance central-local government coordination to combat illegal financial activities.

The meeting listed nine key economic tasks for 2025:

• Vigorously boost consumption and improve investment efficiency to expand domestic demand comprehensively.
• Drive the development of new productive forces through technological innovation and build a modern industrial system.
• Leverage the role of economic system reform and promote the implementation of landmark reform measures.
  • Complete state-owned enterprise reforms and introduce the private economy promotion law.
  • Formulate guidelines for building a unified national market.
  • Advance fiscal and tax system reforms in a coordinated manner.
• Expand high-level opening up, stabilize foreign trade and investment.
  • Gradually increase autonomous and unilateral opening up.
  • Promote the opening up of the service sector and expand pilot programs in areas such as telecommunications, healthcare, and education.
• Effectively prevent and defuse risks in key areas, and firmly maintain the bottom line of preventing systemic risks.
• Coordinate the promotion of new urbanization and comprehensive rural revitalization, and promote integrated urban-rural development.
  • Strictly hold the red line for arable land and rigorously manage the balance of arable lane occupation and replenishment.
• Strengthen the implementation of regional strategies and enhance regional development vitality.
• Coordinate carbon reduction, pollution reduction, green expansion and growth, and accelerate comprehensive green transformation of economic and social development.
• Increase efforts to ensure and improve people’s livelihood, and enhance the people’s sense of gain, happiness, and security.

The meeting also reiterated the need to strengthen the Party’s leadership over economic work and firmly oppose formalism and bureaucratism.

Finally, the meeting called on the entire Party, national, and all sectors of society to unite more closely around Party Central with Comrade Xi Jinping at the core, earnestly implement all the meeting’s decisions, and fully achieve the economic and social development goals and tasks.

  Official economic data

Dec. 9
The National Bureau of Statistics released consumer price index and producer price index data for November 2024 and the first 11 months of the year.

• In November, the national CPI rose 0.2 percent from a year ago, a five-month low.
• During the January-November period, the national CPI was up 0.3 percent from the previous year.
• In November, the national PPI fell 2.5 percent year-on-year, continuing a negative trend since October 2022. The purchasing prices for industrial producers also declined 2.5 percent from a year ago, remaining in negative territory since February 2023.
• During the January-November period, the national PPI fell 2.1 percent compared to the previous year while the purchasing prices for industrial producers fell by 2.2 percent.

Dec. 10
The PRC customs authorities released trade data from November 2024 and the first 11 months of the year (in USD).

November

• Exports increased by 6.7 percent year-on-year to $312.31 billion. This was down from October’s 12.7 percent growth and the 8.4 percent forecast of economists surveyed by The Wall Street Journal.
• Imports decreased by 3.9 percent year-on-year to $214.87 billion. This was the largest drop in nine months and followed a 2.3 percent decline in October.
• The trade surplus was up 42.5 percent year-on-year to $97.44 billion.

January-November

• Exports increased by 5.4 percent year-on-year to $3.24071 trillion.
• Imports increased by 1.2 percent year-on-year to $2.35603 trillion.
• The trade surplus was up 18.3 percent year-on-year to $884.67 billion.

Dec. 12
China’s benchmark 10-year yield fell to a new low of 1.8172 percent.

Since early December, China’s sovereign bond yield has tumbled below several key psychological levels (2 percent, 1.9 percent, and 1.85 percent). The negative yield spread between Chinese and U.S. 10-year government bonds widened to 247 basis points (compared to 245 basis points in April 2024), the largest negative spread in over 22 years.

  Our take

1. The recent CCP meetings on economic work and Xinhua’s featured column on China’s economy give the impression that the Chinese economy is doing fine and faces no significant issues. However, the official propaganda line contrasts with assessments by Chinese economists and the PRC’s own data.

China’s CPI and PPI data for November and the first eleven months of the year point to continued deflationary pressures, weak domestic demand, and declining corporate revenues. The November PPI did increase by 0.1 percent compared to a 0.1 percent decline in October, but that growth appeared to be linked to overseas companies frontloading orders to avoid tariff risks rather than an actual turnaround in the situation. Meanwhile, the November trade figures show underwhelming export growth and further import contractions, which in turn signal a worsening of export performance next year.

The Xi leadership’s optimism about China’s economic situation diverges from the observations of notable Chinese economists. In particular, Gao Shanwen and Fu Peng noted that China faces severe economic challenges, including long-term cyclical recessionary pressures and unfavorable external conditions. Gao also estimated that China’s GDP growth could have been overstated by 10 percentage points between 2021 and 2023, a view that aligns with our calculations and casts doubt on the official data and economic narratives.

Investors at least are under few illusions that the Chinese economy is operating “generally stable with progress amid stability” as Beijing has claimed. Their pessimism and desire for low-risk investments have led to China’s 10-year yields falling below several key psychological thresholds in early December. In the wake of Beijing’s pledge to loosen monetary policy, analyst firms like Tianfeng Securities, Zheshang Securities, and Standard Chartered Bank are anticipating 10-year yields to fall as low as 1.5 percent to 1.6 percent by the end of 2025. Falling Chinese government bond yields will also widen interest rate differentials between the U.S. and China, encouraging capital outflows from the mainland.

2. The Dec. 9 Politburo meeting and the 2024 Central Economic Work Conference (CEWC) offer hints that not all is going well for China and Beijing’s economic rescue efforts despite the propaganda. For instance, the Politburo meeting’s call to “stabilize the property and stock markets” suggests that the wave of economic support measures introduced in late September has had limited effect in reviving the property and stock markets. Also, the call for “more proactive fiscal policy and moderately loose monetary policy,” as well as the strengthening of “extraordinary counter-cyclical adjustments,” suggests that the Xi leadership is concerned about more economic tough times ahead as the incoming Trump administration prepares to step up U.S. protectionism and China-specific restrictions. The easing of monetary policy, however, could exert significant pressure on the RMB exchange rate and compound economic risks. Finally, aside from signaling changes to China’s fiscal and monetary policy, the bulk of the policies announced at the two meetings were a compilation of previously implemented economic measures that have shown limited effectiveness.

The policies introduced at the Politburo meeting and the 2024 CEWC suggest that Beijing still lacks effective strategies and measures to address China’s economic difficulties. Instead, the Xi leadership is relying on propaganda to project confidence and boost investor optimism. Beijing’s assurances of “progress amid stability” seem designed to prop up investor sentiments until key policy targets and specific economic support measures are unveiled at the Two Sessions next year. However, the policy vacuum is likely to weaken investor confidence in the near term given the uncertainty surrounding the CCP authorities’ ability to come up with and implement impactful solutions.

3. The mention of anti-corruption efforts at the recent CCP meetings suggests that Beijing is likely facing growing internal dissatisfaction (particularly with governance failures) and the Xi leadership is looking to suppress dissent from officials and non-CCP personages by raising the prospect of anti-corruption probes.

Notably, the Politburo meeting emphasized that the anti-corruption agencies must focus on strengthening the “two safeguards” through political oversight, while a high-pressure stance on corruption must be maintained. Also, Xi Jinping told non-CCP personages at the economic work symposium that corruption will be “severely punished.”

4. State media reports of the non-CCP personages economic symposium, the Dec. 9 Politburo meeting, and the 2024 CEWC position Xi as the “core” leader and urged both Party and non-Party individuals to “fully implement the spirit of the 20th Party Congress” and the plenary sessions of the 20th Central Committee. The continued emphasis and promotion of Xi’s political position and agenda in official propaganda indicate that the latter retains a firm grip on power despite mounting challenges and recent speculation in Chinese-speaking circles that he has “lost power.”

Xi can only be said to be losing his grip on power if there are public deviations from current practices meant to entrench his “quan wei,” such as a change in the current propaganda promoting Xi or members of the Politburo Standing Committee no longer submitting personal reports (述職) to Xi next year. However, we believe that a potential Xi downfall is less likely to be heralded by gradual signs of a power shift and Xi slowly “retreating” from the scene, and is more likely to be abrupt and dramatic. This is because the regime currently adheres to a one-man dictatorship instead of the “collective leadership” model, and any effort to oust Xi will lead to a zero-sum outcome (akin to the removal of the “Gang of Four” after the Cultural Revolution).