SCIO briefing on China's economic performance in Q1 2025

National Business Daily:

We have noted the central government's recent introduction of macroeconomic policies, including those encouraging large-scale equipment upgrades and consumer goods trade-ins, alongside adjustments to real estate policies. How effective have these policies been? In what ways are they reflected in recent economic data? Thank you.

Sheng Laiyun:

Thank you for your questions. The data released just now reflect the impact of macroeconomic policies. As I have mentioned many times, since the fourth quarter of last year, the central government's package of macroeconomic policies has played a crucial role in reversing the decline in economic growth and promoting a steady economic recovery. This year, we have implemented more proactive and effective macro policies, with some policies and measures increasing in both intensity and effectiveness. Policies that support the implementation of major national strategies and the buildup of the nation's security capacity in key areas and encourage large-scale equipment upgrades and consumer goods trade-ins have been improved and expanded, providing greater support and broader subsidy coverage. Local governments have earnestly implemented the decisions and arrangements of the central government and have introduced detailed and substantial policies tailored to their own circumstances. Existing and incremental policies have reinforced each other, leading to increasing impact, which is summarized as the "five effectivenesses."

2.First, these policies have effectively promoted a rebound in consumption. In the first quarter, total retail sales of consumer goods increased by 4.6% year on year, up 1.1 percentage points from last year, which is a significant increase. Among these, policies that support the implementation of major national strategies and the buildup of the nation's security capacity in key areas and encourage large-scale equipment upgrades and consumer goods trade-ins — especially the policy for trade-ins of consumer goods — have shown significant effects. Sales of newly included products such as electric bikes, mobile phones, tablets and smartwatches have grown rapidly. In the first quarter, retail sales of communication equipment by units above designated size rose 26.9% year on year, while sales of cultural and office supplies increased 21.7%. At the same time, household appliances and audiovisual equipment rose 19.3% and furniture grew 18.1%. These four categories alone contributed 1.4 percentage points to the overall growth in total retail sales of consumer goods. According to data from the Ministry of Commerce, as of midnight on April 8, consumers had purchased a total of 35.71 million home appliances across 12 major categories through trade-in programs and initiated 2.085 million applications for vehicle trade-in subsidies, effectively promoting a recovery in consumption.

Second, these policies have effectively driven growth in investment. Since the beginning of this year, local governments have accelerated the issuance of new special bonds, resulting in improved funding and the advancement of projects. In the first quarter, newly issued special bonds totaled nearly 1 trillion yuan, and actual funds allocated for fixed asset investment rose 3.7% year on year, compared with a 2.3% decrease last year. Infrastructure investment increased 5.8%, 1.4 percentage points higher than last year. Investment in equipment, tools and instruments rose 19% year on year in the first quarter, 3.3 percentage points higher than last year. This growth was driven by policies that support the implementation of major national strategies and the buildup of the nation's security capacity in key areas, especially those encouraging large-scale equipment upgrades. This contributed 64.6% to total investment growth, effectively boosting overall investment.

Third, these policies have effectively promoted industrial production. Policies promoting consumption growth and accelerating investment have inevitably driven enterprises to increase production. The manufacturing sector related to these products performed strongly in the first quarter. For example, the output of specialized equipment for agricultural product processing and specialized packaging equipment both saw double-digit year-on-year increases. In addition, the output of NEVs increased 45.4%, while production of charging piles rose 26.3%, helping to drive industrial growth.

Fourth, these policies have effectively revitalized market activity. This result is inevitable, as the development of production and circulation makes the economic cycle more active and leads to increases in related factors, including freight and express delivery volumes. In particular, some incremental policies introduced this year have had a clear effect on stabilizing the real estate sector and boosting activity in the stock market, further enhancing overall market vitality.

Fifth, these policies have effectively boosted market confidence. A wide range of policies have continued to take effect, promoting economic recovery and improving market expectations among the public. The manufacturing PMI was 50.5% in March, rising for two consecutive months. The business activity index for services stood at 50.3%, also within the expansion range.

In view of these five dimentions, the effects of macro policies since the beginning of this year have been very evident. The package of policies introduced since the meeting of the Political Bureau of the CPC Central Committee on Sept. 26 last year has reversed the decline in economic growth. This year, the combined efforts of incremental and existing policies have helped the economy get off to a strong start. Next, we need to focus on more detailed and effective implementation of policies to further unlock their potential. Thank you.