Senior economic expert shares insights on China’s economy in H2

China’s top leadership has pledged to support the economy, which is facing profound and complex changes, in the second half of the year, according to a release issued after the meeting of the Political Bureau of the Communist Party of China (CPC) Central Committee on Wednesday.

The meeting, which set the economic course for the rest of the year, said China will keep policy steady with “flexibility and foresight,” stabilizing employment, business, markets and expectations.

It called for the use of structural monetary policy tools to provide stronger support for technological innovation, boost consumption, aid small firms and stabilize foreign trade.

As the 14th Five-Year Plan period (2021-2025) nears its end, the meeting noted that the 15th Five-Year Plan (2026-2030) will be a crucial phase for consolidating the foundation and making all-round efforts to basically realize socialist modernization. China will adhere to the general principle of seeking progress while maintaining stability and accelerate the forging of a new development paradigm, it said.

Professor Liu Yuanchun, the president of the Shanghai University of Finance and Economics, shared his insights with China Media Group (CMG) on the meeting’s outcomes. Liu specializes in open macroeconomics, monetary policy, inflation and China’s economic growth. The conversation has been edited for clarity and brevity.

CMG: How is the situation different from the situation at the end of April, when the Political Bureau meeting discussed the economic state of affairs in the context of U.S. tariffs?

Liu Yuanchun: The April meetingconvened after the administration of U.S. President Donald Trump imposed “reciprocal tariffs” on its trading partners, causing global panic and uncertainty and resulting in a series of fluctuations in the trade and investment markets.

At present, we can see that the U.S. is engaging in tariff negotiations with various countries, and progress has been made in China-U.S. economic and trade talks. The trade uncertainty and global turmoil stemming from the U.S. tariff war have diminished compared to the first half of the year. But one must admit that the complexity and severity of the international situation facing China in the second half remain unresolved.

Domestically, China’s GDP grew 5.3 percent year on year in the first half of the year, faster than expected, but structural challenges remain.

CMG: The meeting called for expanding consumption while improving livelihoods. What can be done in the second half of the year?

Liu Yuanchun: Expanding consumption is an economic strategy. It is not feasible to simply rely on stimulating consumption or achieving stable growth in the short term. Instead, adjustments to institutional mechanisms and foundational variables are needed to achieve stable consumption expansion and a higher consumption rate. Therefore, improving people’s incomes, repairing resident balance sheet, strengthening social security system and advancing livelihood initiatives are important to support consumer spending.

China will introduce a series of livelihood-related policies in the second half of the year, such as giving more support to preschool education and subsidies for disadvantaged students, expanding investment in human resources, and giving subsidies for special-needs families and the elderly.

These measures can not only address the shortfall in consumption but also provide institutional support to boost the rate of consumption. It’s also a critical part during the 15th Five-Year Plan period.

CMG: The meeting proposed stimulating private investment and expanding effective investment. How can this be achieved?

Liu Yuanchun: Official data released in June showed a slowdown in real estate investment and private investment growth rates, increasing economic pressures in the second half. An important countermeasure is to stimulate the vitality and enthusiasm of private investment. First, we need to expand room for private capital. Second, the expected return on private investment needs to be improved. Currently, China is implementing a series of reforms to make space for investment, while leveraging fiscal and monetary policies to improve returns for private enterprises, so that private investment can be adequately safeguarded.

CMG: The meeting emphasized the importance of stabilizing foreign trade and investment, which is significant for boosting market confidence as well as the confidence of foreign trade companies. Please elaborate on that.

Liu Yuanchun: The focus on stabilizing foreign trade indicates that the current international trade situation that China faces has undergone some changes. For example, the economic and trade talks between China and the U.S. have not reached a definitive conclusion.

If the U.S. reaches tariff agreements with its major trading nations, it will certainly impact China’s trade with those nations, effectively restructuring the global trade landscape.

Phenomena like “rush exports” – a surge in exports particular to the U.S. – in the first half, driven by businesses trying to beat anticipated tariff hikes, has prematurely released some of our trade potential, thereby increasing pressure in the latter half of the year.

These factors directly contribute to heightened uncertainty in foreign trade for the second half of the year. It requires China to strengthen countermeasures in key areas and key enterprises, while preparing contingency plans for unforeseen “black swan” events and extreme situations. This explains why the Political Bureau meeting placed such emphasis on stabilizing foreign trade and specifically highlighted corresponding measures.

CMG: China has allocated 69 billion yuan (about $9.66 billion) in its third batch of ultra-long special treasury bond funds to support its consumer goods trade-in program. What can we expect next?

Liu Yuanchun:In the second half, trade-in program will expand to cover more product categories, thereby boosting retail sales. The program will expand from traditional durable goods to emerging new consumer goods, and from physical goods to services. This is an inevitable outcome. Looking ahead, we cannot rely solely on sustained consumption subsidies to achieve the effect of stabilizing consumption in the medium term. More importantly, we need to make appropriate adjustments, particularly emphasizing the need to release consumption potential from the perspective of improving people’s livelihoods and expanding supply.