The 1st Academic Salon for Domestic and Foreign Media in 2025 to Interpret the National 'Two Sessions' - 2025-04-01
The Information Office of Shanghai Municipality organized the first academic salon for domestic and foreign media in 2025 in partnership with Shanghai Academy of Social Sciences (SASS) on March 27. A few experts, including Shen Kaiyan, Liu Liang, Sheng Lei and Tao Xidong, were invited to the salon to interpret the 2025 Two Sessions which closed two weeks ago on the main topic (High-quality Economic Development) and three subtopics (The Belt and Road Initiative and Global Cooperation, Green Transition and “Carbon Peaking and Neutrality” Targets, and Urban-Rural Integration and Common Prosperity). Media agencies present at the salon asked the experts about a range of issues, including “the impacts of the U.S. tariff policy on China and China’s response,” “what China will do to boost domestic consumption?” “how common prosperity and the income distribution system reflect fairness?” and “business climate building and ways to boost the confidence of foreign investors.” Here is an edited transcript of the Q&As.
Q: ITAR-TASS: Ms. Shen just mentioned the buzzword “pursuing progress while ensuring stability.” China’s economy is closely tied with the global economy, especially America. Given America’s protectionist policy, how can China approach this general principle, and to what extent will the U.S. tariff policy affect the stable development of China’s economy?
A: Shen Kaiyan: It is true that China’s economy is closely intertwined with the world economy, and China-U.S. economic and trade ties matter a lot to China’s economic development going forward. After President Trump was inaugurated for his second term, he imposed higher tariffs on a global scale (not just on China). This move has brought a big shock to China as an export-oriented country. Back when Trump took office for his first term, China anticipated that the U.S. was going to impose higher tariffs and put forward two countermeasures: one is to foster a new pattern of development that is focused on the domestic economy and features positive interplay between domestic and international economic flows; the other is to boost domestic demand and consumption as a way to address possible lack of external demand. Subsequently, in the process of driving stable development of the economy, in addition to following the general principle of pursuing progress while ensuring stability, China continued to focus on boosting consumer demand and investment demand to expand domestic demand, with a view to closing the gap posed by declining external demand.
Q: South China Morning Post (SCMP): At the Boao Forum for Asia held lately, some economists said that this year’s economy had a good start, and a few foreign-funded investment banks raised their forecasts for China’s GDP growth in the first quarter accordingly. However, economists also point out that the domestic demand needs a further boost, and it is still uncertain if the upturn of the real estate market will sustain. What’s your take on this from a professional perspective, Ms. Shen and Mr. Liu?
A: Shen Kaiyan: Domestic demand and real estate are indeed priorities of this year’s government work. The demand was low in general last year, so the central government adopted a proactive fiscal policy to boost demand in Q4 2024. This year, the government employed both fiscal and monetary policies, including a new round of large-scale equipment upgrades and consumer goods trade-in programs and steps to implement major national strategies and enhance security capacity in key areas. Such efforts on both investment and consumption sides are intended to make the economy better in the first half of this year.
The real estate market is critical. The central government’s work report mentions “efforts to stem the downturn and restore stability” in the real estate market. This indicates that the market is still on the downside. The top priority in 2025 is to stem the downturn before restoring stability and upturn. The long industrial chain of real estate plays a significant role in driving the economy. To address the excessive commodity housing stock, the central government’s work report and the Central Economic Work Conference proposed that the government or state-owned enterprises purchase commodity housing stock and turn it into government-subsidized housing for those with rigid demand. To this end, the central government has rolled out a series of policies so far and will make further efforts until the real estate market stabilizes.
In addition to stabilizing the housing market, stabilizing the stock market is also a priority for this year’s economic work.
Liu Liang: This year’s macroeconomy has a smooth start as it is notably energized by new industries created by innovative technologies, such as DeepSeek AI and Unitree robots. Previously, new drivers for economic growth were not identified due to the shift from existing drivers to new ones, leading to lack of confidence in the economy, while this year new growth drivers like artificial intelligence have been tapped into. As technologies drive industrial upgrading, the economic growth drivers of China in general and Shanghai in particular will sustain steadily. After all, economic growth driven by a major technological revolution usually lasts. Therefore, the macroeconomic situation in 2025 won’t be too bad.
On the front of foreign trade and foreign investment, many plans have been put in place, such as the dual circulation drive and the Belt and Road Initiative. Thanks to the BRI, emerging markets are rising, so China is growing less dependent on the American market. For example, the neighboring ASEAN market shows the momentum of long-term, stable and rapid growth. In 2024, the trade between China and ASEAN grew by 9%, far exceeding China’s foreign trade growth in the same year.
As for housing and stock markets, the central government has rolled out a range of supportive policies since last year. The effects are gradually showing due to the time lag of fiscal and monetary policies. The central government’s attitude toward the housing market is clear: that is to maintain stability. The housing market has stabilized over the recent two months. Going forward, the housing market is unlikely to see wild swings. Instead, stability is the ultimate goal. On the whole, we are optimistic about China’s macroeconomy in 2025.
Q: Central News Agency (CNA): Mr. Tao, you mentioned issues related to common prosperity. This year’s government work report associates common prosperity with income distribution. On the latter, the report proposes to move faster to develop a skills-based pay system. This idea first appeared in a document issued last October, while “better pay for those with a dedication to innovation” was not highlighted previously. How do you see such a change? The previous emphasis was distribution according to one’s work, a conventional notion of fairness to close the gap. How should “better pay for innovators” reflect fairness?
A: Tao Xidong: Thank you. This is a good question. You must have done an in-depth, comprehensive study of the report. Here is my take on this question for your reference only. Distribution according to one’s work is an essential part of the socialist distribution system with Chinese characteristics. It shows the superiority of the socialist system and incentivizes workers to create a better life and advance social progress. The government work report’s proposal of developing a skills-based pay system is a new experiment in the income distribution reform in line with China’s development needs. Since the 18th National Congress of the CPC, the Party Central Committee has given a high priority to self-reliance and strength in science and technology and laid a strong emphasis on independent innovation. Innovation in turn relies on talent, especially skilled innovators. This requires the reform of the traditional talent appraisal system by introducing institutional incentives that allow skilled personnel to focus on scientific research. The inclusion of research innovativeness, translation rate and actual contribution in an income-linked performance appraisal system enables scientists and engineers who have made original contributions to get their due pay and benefits. This move will stimulate innovation vitality and help China pursue self-reliance and strength in science and technology. This also reflects the roles played by a well-functioning government and an efficient market.
The motivating distribution reform that ensures better pay for innovators is not at odds with the goal of equity and common prosperity. Common prosperity is pursued in stages. It does not mean simultaneous, equal prosperity for all people and all parts of the country. Instead, it is a dynamic lift process based on getting rich by working hard. Some people and regions get prosperous first and then help others catch up. And ultimately, we will achieve common prosperity for all. This is an inexorable law. Seen from this perspective, better pay for innovators is a wise move that reflects the soundness and fairness of common prosperity.
Q: Shanghai Daily: Ms. Shen and Mr. Liu both mentioned that this year’s macroeconomic situation is stable, and you are bullish about its subsequent performance. In terms of boosting consumption and consumer confidence, Mr. Liu once pointed out the time lag of policies. Last year, we often heard about declines in consumption and lack of consumer confidence, or the likes. I want to know if the existing policies have worked and when we will see the notable effects of additional policies. Moreover, the central government and local governments, such as Shanghai, rolled out policies to boost consumption lately. Which policies or coupling effects do you expect?
A: Shen Kaiyan: Given the lackluster performance of the consumer market last year, the government introduced a succession of intensive policies at the end of last year. In the first quarter of this year, these policies continued to take effect, contributing to the recovery of consumer spending. Growing flows of visitors at malls and supermarkets are palpable.
Now there are two major directions of consumption. One is that the traditional consumer sector, including catering and health industries, continues to develop steadily. The other is that new scenarios of consumption keep emerging, along with the model of linkage consumption, such as the linked development of commerce, tourism, culture, sports and MICE. New concepts, including “silver economy,” “snow and ice economy,” “first-launch economy” and “nighttime economy,” are also emerging one after another. All places are employing diverse means to unleash consumption vitality.
In terms of macro policies, there is a key fiscal and tax move—the gradual delegation of powers over the excise tax to the local government. This move is intended to make up for the lack of main tax sources at local governments. Once powers over the excise tax are delegated, local governments will actively seek to boost consumption in order to increase tax revenue. The influx of more consumer flows to the local level means increases in local tax revenue. Thus, local governments will have the inner drive to boost consumption. This is not only in line with the Chinese economy’s macro requirement of boosting consumption, but also a tangible need of developing local economy. Overall, I am optimistic about consumption boost going forward.
However, we must understand that what really drives the economy is effective demand, or affordable demand. An increase in spending power, in turn, relies on an increase in real income, which boils down to the synergetic development of production, investment and supply sides. Only an economic boom can make the employment situation better, thereby increasing people’s incomes. Although stimulus policies can boost consumption in the short run, driving people’s income growth is the key solution in the long run.
Liu Liang: In the process of stabilizing growth and boosting consumption, pro-consumption policies launched in the last two years, such as consumption subsidy, focused on the short run. Since the end of last year, policies to stimulate consumption have combined the long-term with the short-term, including many policies to increase incomes. The government work report makes it clear that boosting consumption requires increasing people’s incomes, not just income increases in the short run, but more importantly such expectations in the long run.
In effect, the key determinant of consumption growth is still long-term income growth. Thus, we need to watch the effects of policies aimed at income increases in the long run. Take the example of initiatives to ensure the people’s wellbeing. Though such initiatives are seemingly not directly associated with income increases, they play a positive role in changing people’s expectations for long-term incomes. Another example is policies to boost the private sector, which provides about 60% of the jobs in China. The private sector’s sound development can ensure employment, thereby stabilizing people’s long-term incomes. It means a lot to consumption growth.
On the said fronts, with the gradual execution of relevant actions, the private sector has seen the effects of a series of policies and turned for the better since early last year. The investment in fixed assets in the private sector, for example, recorded negative growth at the end of the year before last, turned to positive last year before posting a sustained, rapid rally and growth. All this underpins consumption in the long run and drives long-term consumption growth.
Q: The Mirror, Hong Kong: I have a question for Ms. Shen. Over recent years, some foreign-funded companies have withdrawn from China and closed their offices or factories here. At a recent forum, foreign investors expressed their concerns over China’s business climate and policy impacts. Take Shanghai as an example. What policies can boost foreign investors’ confidence in China?
A: Shen Kaiyan: Actually, I think this is a two-sided issue. On the one hand, some foreign investors did have withdrawn from China. On the other, some of the foreign investors who once withdrew have returned to the Chinese market, and new foreign investors have entered or are entering China.
Then, what can Shanghai do to attract more foreign investment? First, Shanghai has made notable progress in institutional opening-up. For example, the Lin-gang Special Area has opened some conservative, non-open sectors in the negative list, such as telecommunications and medical devices, to foreign investors. This sends out a very positive signal. The education sector, also one of the sectors essential to China, is gradually opening up. This is certainly good news.
Second, while emphasizing opening up, China also takes seriously the creation of a sound business climate. Some say China’s business environment is deteriorating but seen from the World Bank’s Ease of Doing Business rankings, China’s position has been rising over the years. China did not make it into the top 50 last year, but it is expected to make it this year and see its place move up. Nonetheless, we must also see that China does fall behind in some respects of business climate. In terms of taxation, for example, China will probably need to make improvements in time costs and tax rates, among other areas. In terms of cross-border trade in services, China also needs to align further with the rest of the world.
Moreover, in terms of corporate procedures like filing for bankruptcy, it is generally believed that the procedures for closing or liquidating a business are too complex. Some detailed rules on these procedures have been rolled out to create a better business climate in this regard.
On the whole, China might be not as attractive as it once was to foreign direct investment (or FDI), but as long as China sticks to the path of market economy and continues to pursue its reform and opening-up policy, it will still be a fertile ground for global investors. Because China boasts a huge market, a sound innovation system and a large workforce of high-caliber industrial workers. I believe that the phenomenon of some foreign investors withdrawing from China we have seen recently will abate going forward.
About the Experts
Shen Kaiyan, Director and Research Fellow, Institute of Economics, SASS, and a “Zhongli Scholar” under the Social Science Masters Program. Her main areas of interest include political economics, economic reform and development strategy.
Liu Liang, Deputy Director and Research Fellow, Institute of Applied Economy, SASS. He once presided over many national and municipal research projects and received the First Prize for Major Achievements under the 13th Five-Year Plan of Shanghai.
Sheng Lei, Deputy Director, Deputy Editor-in-Chief & Research Fellow, Journal of Social Sciences, SASS, and a member of the Shanghai Oriental Young Talents Program. He has published more than 100 academic papers and articles.
Tao Xidong, Deputy Head and Research Fellow, Center for Think Tank Studies, SASS. He has published more than 100 academic papers. His primary areas of interest include regional governance.
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