Lujiazui area in Shanghai Photo:Xinhua

The annual two sessions are set to convene next week, which will serve as an important window for the outside world to observe China's economy. As the Government Work Report will unveil this year's economic growth targets and specific plans for economic initiatives, key macroeconomic indicators, including GDP, the deficit-to-GDP ratio, and the consumer price index, will be closely fathomed.

Regarding the economic work for 2025, the Central Economic Work Conference (CEWC) held in December made some specific arrangements. The conference emphasized the need to strengthen the coordination between fiscal and financial policies, highlighting the importance of implementing better policy coordination in macroeconomic regulation. Through better combination of fiscal and monetary policies, the Chinese economy is expected to unlock new growth opportunities.

In terms of fiscal policy, the CEWC in December noted that China should adopt a more proactive fiscal policy. It should set a higher deficit-to-GDP ratio and ensure that its fiscal policy is continuously forceful and more impactful.

China has been pursuing a proactive fiscal policy for years, yet references to a "more proactive fiscal policy" are relatively uncommon. The overall operation of China's economy is stable and progressing steadily, but the issue of insufficient domestic demand may persist, and the economy will face possibly greater external uncertainties in 2025.

To effectively stimulate consumption, expand investment, boost foreign trade and attract more foreign investment, China has proposed to implement a more proactive fiscal policy in 2025, which means adopting stronger policy measures than in 2024 to accelerate the recovery of the economy.

A more proactive fiscal policy will play a leading role in macroeconomic regulation, utilizing a larger scale of fiscal resources to increase the intensity of expenditures, accelerate the pace of spending, optimize the expenditure structure, and enhance local financial capacity. In 2025, a more proactive fiscal policy approach is expected to come out with more effective measures to ramp up the economic activity.

Lian Ping Photo: Courtesy of Lian Ping

In terms of monetary policy, the CEWC has proposed a shift from its previous prudent approach to a moderately accommodative stance, signaling a significant change in China's monetary policy framework. As a result, we can expect notable developments in various aspects of monetary policy in 2025 and beyond.

Since September, the People's Bank of China, the National Development and Reform Commission, the Ministry of Finance and other departments successively introduced a series of incremental policies to significantly boost the economy in the fourth quarter. In 2025, the Chinese economy is expected to continue this recovery trend, achieving steady progress and improvement.

In 2025, macroeconomic policies are expected to prioritize vigorously boosting consumption, improving investment efficiency and expanding domestic demand on all fronts. It is anticipated that retail sales will grow by 5.5 percent in 2025, and the contribution rate of final consumption expenditure to GDP is expected to rise to around 65 percent.

The upcoming policies are expected to provide greater support for consumption. The proceeds obtained from the issuance of ultra-long special treasury bonds is likely to exceed investments in certain sectors in 2024, particularly in service consumption and emerging concurtailsumption areas that are closely related with high-tech development. This could lead to a noticeable acceleration in growth rates in those sectors, offering stronger support and momentum for economic growth in 2025.

In 2025, against the backdrop of a continued recovery in global trade demand, the external uncertainties that have a potential impact on China's exports mainly come from the protectionist tariffs imposed by the US and trade protection measures adopted by some other countries. The growth rate of exports may be curtailed to some extent.

Imports are less influenced by the external factors and mainly depend on domestic demand, with expected growth of about 2 percent in imports in 2025. Policies to stabilize foreign trade will focus on cultivating new growth momentum in foreign trade, increasing financial support and expanding high-standard opening-up.

The author is director and chief economist of Guangkai Chief Industry Research Institute. bizopinion@globaltimes.com.cn