Tourists at a park in Rizhao, Shandong Province, on Oct. 4 Photo: Rong Zhi/CSST

---

Since the second half of 2024, the CPC Central Committee and the State Council have launched a raft of incremental economic policies. While boosting investor and consumer confidence, these moves have significantly strengthened the momentum of economic recovery and growth. 

Unprecedented scope

The new policy package is unprecedented in scale. First, the debt limit will be raised significantly to support local governments in diffusing hidden debt risks, with analysts predicting that the debt ceiling will increase by no less than 2 trillion yuan—the largest expansion in recent years. Second, on Oct. 21, the loan prime rates (LPR) for both one-year and over-five-year terms were cut by 25 basis points, representing the most substantial reduction since the reform of the LPR mechanism. This measure, along with a simultaneous reduction of mortgage rates for existing home loans, is expected to benefit 50 million households, affecting approximately 150 million people. Third, a new issuance of special treasury bonds, expected to exceed 1 trillion yuan, aims to support major state-owned commercial banks. Fourth, effective investments will be expanded. So far, 700 billion yuan have been earmarked from the central government budget for investment and 1 trillion yuan worth of ultra-long-term special treasury bonds have been issued. Fifth, measures have been introduced to stabilize the real estate market, including the redevelopment of 1 million urban village and hazardous housing units. In support of this, credit for approved “white list” projects will be increased to 4 trillion yuan.

The policy coordination efforts are robust, with broad coverage across key areas such as fiscal policy, monetary policy, consumption, investment, and employment, involving a range of stakeholders from local governments to enterprises, banks, households, and individuals. In a coordinated, multi-department effort, the Information Office of the State Council held five press conferences around the National day holiday (Oct. 1–7), during which 10 ministries and commissions, including the People’s Bank of China, National Financial Regulatory Administration, Ministry of Industry and Information Technology, Ministry of Justice,  Ministry of Housing and Urban-Rural Development, and Ministry of Natural Resources, introduced the policy package’s implementation, demonstrating a collaborative approach to the implementation of multipronged measures.  

The policies and measures are also innovative and targeted. In terms of debt management, the debt ceiling for local governments has been elevated substantively. In the capital and property markets, the tools of securities, funds, and insurance swap facilities and special reloans to support listed companies’ buybacks and increase the stock holdings of major shareholders have been established to facilitate the flow of capital into the stock market. Meanwhile, special bonds have been issued to support local governments in revitalizing idle land. To strengthen financial services, the Ministry of Finance will, for the first time in 26 years, issue special treasury bonds to replenish the core 1-tier capital of large state-owned commercial banks and improve their capacity to support the real economy more effectively. In addition, stress has been laid on expanding domestic demand. Vigorous efforts are ongoing to support the implementation of major national strategies and build up security capacity in key areas, while promoting large-scale equipment upgrading and trade-ins of consumer goods to deliver tangible benefits directly to consumers. Furthermore, the China Resources Recycling Group Co., Ltd., a centrally administered state-owned enterprise, has officially been established to bolster these measures, alongside efforts to promote digital and green consumption as new drivers of growth. 

Multifold reform dividends

The above policies and initiatives embody thoughtful planning. First, they integrate both long- and short-term measures. In addition to short-term policy tools like reserve requirement ratio reduction and consumer goods trade-ins, there are also measures for mid- and long-term development, such as intensifying efforts to support local governments’ debt restructuring and even increasing funds and subsidies for students. Second, the policies account for both expectations and reality. They underpin the implementation of major national strategies while building up security capacity in key areas and promoting large-scale equipment upgrading and trade-ins of consumer goods to unlock investment and consumption potential. Furthermore, two structural monetary policy tools were introduced to ensure the stability of the capital market.  

Attention has been paid to structural optimization. First, the incremental policies give equal weight to supply and demand. On one hand, supply-side structural reform will be further deepened through accelerated construction of new infrastructure and enhanced support for enterprises to further align supply with medium- and high-end demand. On the other hand, expanding domestic demand is emphasized to increase effective investment and fuel the consumption of staple commodities. Second, consumption and investment are regarded as equally crucial. Unlike previous policies for stabilizing growth, which relied primarily on infrastructure investment, the package of incremental policies attaches more importance to stimulating consumption, including providing more support for certain groups of people and boosting service consumption like elderly care and childcare. Third, material capital and human capital are both valued. Not only will effective investment be expanded to strengthen the physical foundation, but fiscal support will be stepped up in areas related to people’s livelihoods, such as employment, education, and social security, to promote material capital formation and human capital accumulation at the same time. 

Li Haijian (research fellow) and Tang Yuehuan are from the Institute of Quantitative and Technological Economics at the Chinese Academy of Social Sciences (CASS). Yang Yaowu is an associate research fellow from the Institute of Economics at CASS. 

Edited by CHEN MIRONG