The July 30 Politburo meeting of the Communist Party of China (CPC) Central Committee has set the tone for economic policymaking in the second half of the year. Convened at a pivotal moment, marking both the final push of the 14th Five-Year Plan and the early planning stage for the 15th, the meeting conveyed a clear policy direction aimed at striking a balance between short-term economic stabilization and long-term high-quality development.

In the face of the increasingly complex international environment, as well as China's domestic structural challenges, the meeting recognizes the achievements of the first half of the year, while also acknowledging the risks and uncertainties ahead. It emphasizes enhancing risk awareness and adhering to a bottom-line mindset in policymaking.

On the one hand, the meeting calls for reinforcing the current momentum of economic recovery, resolving key operational bottlenecks, boosting domestic consumption, and strengthening the domestic economic circulation. On the other, it looks to the future, mentioning the need to accelerate the development of emerging strategic industries, promote high-quality progress in major projects and urban renewal, and avoid falling back on debt-driven growth models.

Importantly, the meeting also announced that the Fourth Plenary Session of the 20th CPC Central Committee will be held in October to deliberate and draft proposals for the 15th Five-Year Plan. This move reflects a forward-looking approach and the leadership's commitment to long-term planning.

Judging from the first-half performance, the Chinese economy has demonstrated strong resilience. Despite a complex and volatile external environment, GDP grew by 5.3% year-on-year, surpassing market expectations. This suggests that the central government remains confident in achieving this year's growth targets. According to ANBOUND, China is well-positioned to meet its full-year GDP growth forecast of 5.2%.

However, China must also confront the deeper, more structural issues at hand, i.e., insufficient consumer and investment demand, persistently low price levels, and growing vulnerabilities in critical technologies due to escalating trade tensions. These challenges are complex and could persist into the next Five-Year Plan period, posing ongoing risks to the country's development. Against this backdrop, its top priority for the second half of the year is to consolidate the hard-won momentum of economic recovery. The meeting reiterates the importance of strengthening the "bottom line mindset" with the core objective of safeguarding the fundamentals of the domestic economy and society. Particularly noteworthy is that the foundation of this bottom line lies in people's livelihoods and employment. This is reflected in the meeting's clear emphasis on "stable employment". It is therefore foreseeable that upcoming policy measures, whether in their design, implementation, or resource allocation, will be closely aligned with employment objectives.

Striking a balance between the continuity and flexibility of macroeconomic policy has emerged as a key theme. The meeting clearly states that "macroeconomic policies must continue to exert force and increase support when needed". Compared to the April meeting's call to "make full and effective use" of existing policies, this latest guidance places greater emphasis on the thorough implementation of fiscal and monetary measures, signaling a shift in focus from expanding the scale of support to improving policy effectiveness. On the fiscal front, the government will accelerate the issuance of public debt, but with a parallel demand to "enhance the efficiency of fund utilization" and avoid idle capital. On the monetary side, while maintaining ample liquidity remains a priority, the meeting specifically calls for "lowering the overall cost of financing for the real economy", suggesting that there may be room for interest rate cuts in the near term. Overall, fiscal resources for the second half of the year appear sufficient. The broader fiscal space is estimated to exceed RMB 7 trillion, including remaining quotas of special-purpose bonds and special sovereign bonds. These tools can be deployed flexibly to cushion against any unexpected shocks in exports or the real estate market.

The latest Politburo meeting emphasized the role of major economic provinces in driving national growth, with a particular focus on coastal powerhouses such as Guangdong, Jiangsu, and Zhejiang. Given the mounting economic pressure in eastern China, the policy response has shifted toward stimulating consumption as a key lever for sustaining momentum. At the heart of this strategy is the expansion of domestic demand, now placed at the center of the policy agenda. Tools to achieve this goal are becoming increasingly multidimensional. On the consumption front, the meeting called for "cultivating new growth drivers in service consumption," with particular emphasis on essential public services such as healthcare, elderly care, and childcare. This approach is closely aligned with the rollout of the national childcare subsidy with RMB 3,600 per child per year, suggesting a deeper integration between expanding service consumption and improving public well-being. On the investment side, efforts are being driven by a dual engine: advancing the "two major projects". i.e., infrastructure and advanced manufacturing, and revitalizing private investment. Over RMB 800 billion in funding for these major projects has already been fully allocated. Meanwhile, a third round of RMB 69 billion in special sovereign bonds will support programs to replace old consumer goods with new ones. This initiative may later be expanded to include service consumption as well. Revitalizing private investment is also key to addressing the imbalance in the manufacturing sector, where state-owned enterprises have seen stronger growth while private enterprises remain subdued. To counter this structural divergence, the government aims to reinvigorate private sector confidence and participation. If demand within the country remains sluggish, additional fiscal measures, such as expanded consumption vouchers or interest subsidies for durable goods, may be deployed to further stimulate the economy.

The campaign against excessive competition is being elevated into a systemic effort aimed at reshaping the market competition landscape. The Politburo meeting outlined a three-pronged governance framework: regulating disorderly corporate competition according to law, managing excess capacity in key industries, and standardizing local government investment promotion practices. This marks a shift from earlier efforts focused on self-discipline in sectors like photovoltaics and new energy vehicles, toward the establishment of long-term, institutionalized, and rule-based mechanisms. For example, the State Administration for Market Regulation (SAMR) is preparing revisions to the Pricing Law to refine the criteria for identifying predatory pricing. Meanwhile, the Ministry of Industry and Information Technology (MIIT) is pushing to phase out outdated production capacity in ten key industries, including steel and nonferrous metals. At the local level, distortive practices such as "zero land-price" deals or excessive tax rebate incentives used to attract investment are also being corrected. Analysts view this initiative as an effort to break the cycle of price wars leading to profit erosion, and to create conditions for a rebound in the Producer Price Index (PPI), thereby easing pressure on corporate profitability. At its core, this approach aims to stimulate high-quality domestic demand through supply-side optimization.

The meeting marked a major strategic shift in addressing real estate risks by fully pivoting toward an urban renewal strategy, which signifies there will be a long-term, structural approach. Rather than directly referencing real estate control measures, the meeting emphasized the need to "advance high-quality urban renewal", integrating real estate into a broader vision of comprehensive urban development. This signals two key shifts: first, a move away from short-term sales stimulation toward enhancing the value and efficiency of existing assets, using initiatives like old neighborhood renovations and low-carbon upgrades to drive investment and consumption; second, a push for fiscal discipline at the local level, with strong language on cleaning up local government financing vehicles and prohibiting new hidden debt, effectively pressuring local authorities to reduce their reliance on land-based revenues. Together, these developments indicate that China's urban economy is now entering a "post-land economy" era, where growth must come from sustainable urban transformation rather than land sales.

It is worth noting that the Politburo meeting emphasized the need to fully mobilize the enthusiasm of all sectors. This means that leaders must adopt the right view of political achievements and focus on economic work in accordance with the new development philosophy. ANBOUND's founder Kung Chan believes that this new development philosophy refers to the five key principles of innovation, coordination, green development, openness, and shared prosperity, as well as the core ideas discussed at the recent urban economic work conference. Notably, the central focus of this Politburo meeting was the economy, with the majority of the discussions centered on economic issues, an emphasis that has been relatively rare in previous meetings.

The positioning of the capital markets will be further strengthened, shifting from stabilizing expectations to enhancing competitiveness. The meeting calls for "enhancing the attractiveness and inclusiveness of the domestic capital market", a formulation that is more strategic than the April meeting's focus on "stabilizing and invigorating" the market. It is expected that policies will unfold along three main lines: first, institutional opening, such as simplifying foreign investment entry procedures and promoting mergers and acquisitions among listed companies; second, investment-side reforms, including increasing dividend payouts and strictly controlling stock reductions to boost shareholder returns; and third, risk prevention and control, with improvements to monitoring mechanisms for quantitative and algorithmic trading. It is clear that the central government has not only acknowledged the stabilization of the capital markets but is also positioning them to provide financing support for the new, high-quality enterprises emerging during the 15th Five-Year Plan period.

The synergy between social welfare and economic development will also be strengthened, with policies becoming more closely interconnected. The meeting emphasizes the need to "expand consumption demand while ensuring and improving people's livelihoods", integrating issues such as employment, social security, and energy security into the broader economic policy framework. For instance, the focus on stabilizing employment targets university graduates and migrant workers, with the Ministry of Human Resources and Social Security planning to lower social security contribution rates and provide unemployment insurance subsidies to help stabilize jobs. Meanwhile, ensuring energy and electricity supply during the summer peak directly impacts both business production and the cost of living for residents.

The 15th Five-Year Plan is anchored in the "modernization breakthrough period", with equal emphasis on technological innovation and deepening reforms. The meeting defines the 15th Five-Year Plan as a critical phase for "consolidating foundations and making comprehensive efforts" to achieve modernization, stressing the need to maintain strategic focus in response to "uncertain and unpredictable factors". The industrial policy highlights "technological innovation leading new productive forces", without specifically mentioning industries like artificial intelligence, robotics, or bio-manufacturing. Reform efforts will focus on building a unified national market by removing regional barriers and obstacles to the flow of factors of production, thereby reducing institutional costs. It is also important to note that the integration of technology and industrial innovation will require breaking through the "bottleneck" in the transformation of research, education, and industry. Next year, pilot programs may introduce "negative list" management for research institutions and expand the decision-making power of enterprises in innovation processes.

In addition, there will be high-level openness in stabilizing foreign trade and institutional reforms to address tariff pressures. In response to the "overdraft effect" of the U.S. tariffs, this meeting shifted its approach from "increasing openness in the service sector" to an emergency strategy aimed at "stabilizing the foundation of foreign trade and foreign investment". This shift is noteworthy. In the short term, measures adopted by the Chinese authorities may include optimizing export tax rebates and providing financing support for foreign trade enterprises, such as special loans from the Export-Import Bank, to mitigate the impact. In the medium to long term, the country may foster new advantages through upgrading free trade pilot zones and promoting the integration of domestic and foreign trade.

All in all, China's policy design for the second half of the year will follow a trajectory of "seeking progress while maintaining stability, and making efforts in areas of balance". Macroeconomic policies will not adopt a mass easing approach, but will leave ample space to respond to unforeseen challenges. The eradication of unhealthy competition is not a short-term movement but rather the beginning of a long-term, rule-of-law-based, market-oriented mechanism. Urban renewal will replace stimulus policies, providing a new anchor for the transformation of the real estate sector. With the launch of the 15th Five-Year Plan formulation, technological innovation and the construction of a unified national market will reshape growth momentum. As the meeting emphasized, China's economic foundation is stable, its advantages are numerous, its resilience is strong, and its potential is vast. By actively responding to changes and securing strategic initiative in intense international competition, China aims to make major breakthroughs in strategic tasks related to its unique path to modernization.

Final analysis conclusion:

China's economy faces deep-rooted, systemic challenges that require both safeguarding people's livelihoods and managing risks, while also urgently fostering long-term growth through structural reforms. The current policy direction is not aimed at pursuing strong stimulus, but rather at stabilizing the fundamentals through a "bottom-line thinking" approach and responding to potential shocks with "timely reinforcement". At the same time, measures like boosting domestic demand, addressing unhealthy competition, and promoting urban renewal are closely linked to high-quality development. However, many of these issues are rooted in the complex contradictions of the economic transition period and cannot be quickly resolved through short-term policies. Moving forward, it will be essential to maintain strategic focus within dynamic balance, avoid systemic risks, and gradually ease deep-rooted pressures through institutional optimization and the passage of time, thus solidifying a sustainable foundation for the 15th Five-Year Plan period.

______________

Yang Xite is a Research Fellow at ANBOUND, an independent think tank.