China's top 3 economic focal points for 2H2025
Boosting consumption, anti-involution and achieving wealth effects via a recovery in housing and stocks.
Beijing is set to focus on three core economic policy areas in the second half of 2025, as China continues to grapple with trade and geopolitical uncertainty in tandem with lacklustre sources of demand.
At the top of the list is boosting domestic demand, in order to compensate for export risks as well as bring about structural changes that set a firm foundation for China's long-term growth.
Beijing will also focus on cracking down on the "involuted" competition that it considers a major hindrance to the health and productivity of China's key industries.
Finally, the Chinese government has signalled that it will to step up efforts to stabilise asset markets, in order to achieve the wealth effects that can boost to domestic demand.
A key focus here will be the recovery of China’s all-important property sector, which remains in the grip of a multi-year slump.
Increasing government debt to grow domestic consumption
Beijing indicated at the end of last year that "comprehensively expanding domestic demand" would be the most important of its key economic goals in 2025.
The Central Economic Work Conference held in December 2024 made the announcement in anticipation of aggressive trade action by the Trump administration, and the damage this could inflict on China's exports.
These expectations were subsequently vindicated at the start of April when Trump launched his Liberation Tariffs, eventually raising the US impost on Chinese goods to 145%.
While the tariffs have since been scaled back, they remain at exorbitant levels compared to before Trump's presidency, while their future trajectory remains uncertain.
Consequently, Beijing will continue to maintain a heavy focus on cultivating China's domestic demand in the second half, with a heavy focus on household consumption.
This is not just to deal with the short-term headwinds of a Trump-led trade war, but also to put the Chinese economy on a more sustainable development path that gives greater emphasis to "domestic circulation."
On 16 July, the State Council held a meeting concerning "work on the implementation of key policy measures to strengthen domestic circulation."
Since then, "expanding domestic demand" and "spurring consumption" have been frequently used phrases for China's central government authorities.
On 25 July, the Ministry of Finance (MOF) announced that it would accelerate the unveiling of "quantitative increase policies to spur consumption, guide local government to enhance the consumption environment, and optimise consumption supply."
The State Council also stressed the continued use of fiscal policy to drive domestic consumption.
It's doing this with its "cash-for-clunkers" policy that subsidises consumer purchases of a broad range of goods, including EVs, smartphones and household appliances.
As of July, MOF and the National Development and Reform Commission (NDRC) had transferred funds to China's local governments raised from this year's third issue of 69 trillion yuan in ultra-long-term treasuries.
The funds will be used to drive implementation of cash-for-clunkers initiatives at the local level.
MOF and NDRC also plan to dispatch further funds to support the cash-for-clunkers scheme in October, raised from a fourth issue of 69 billion yuan in ultra-long-term treasuries.
Domestic commentary highlights cash-for-clunkers as a pivotal means for China to use fiscal policy to boost domestic consumption.
The Chinese central bank is expected to play a complementary role, in the form of structured monetary policy tools that deliver support to priority areas that include spurring consumption and supporting science and tech innovation.
China’s anti-involution campaign against market competition
Beijing is expected to step up its crackdown on "involuted competition" - a term used to describe mutual destructive forms of market rivalry that involve profit-despoiling price cuts and the accumulation of excessive supply.
The central government signalled that cracking down on involution would be a key theme for 2025, at both the Central Economic Work Conference held in December and the Two Sessions congress held in March.
Since the start of the second half, Beijing's signalling on the need to crack down further on involuted competition have come hard and fast.
On 1 July, the Central Financial and Economic Affairs Commission called for "dealing with low price, disorderly competition by enterprises."
It also called for "driving the orderly withdrawal of backwards capacity and guiding enterprises to raise product quality."
On 16 July, the State Council heard a report on "standardising the competitive order" in China's all-important electric vehicles sector.
Shortly afterwards, other central government agencies including NDRC, the markets regulator and the Ministry of Industry and Information Technology (MIIT) issued related measures on curbing EV sector competition.
MIIT has also unveiled "growth stabilisation work plans" (稳增长工作方案) to deal with involuted competition in ten key industries, including steel, non-ferrous metals, petrochemicals and building materials.
Many of China’s market observers view the anti-involution campaign as just a re-branding of supply-side reforms launched by Xi around a decade ago.
Li Xunlei (李迅雷), chief economist at Zhongtai International, argues that the conditions for the current round of supply adjustments are significantly different, however.
He points to efforts by China to create a "grand unified market" in bid to break down regional monopolies and trade barriers, and optimise the nationwide allocation of resources.
Li also argues that Beijing is pursuing a more "market-based and rule-of-law-based mentality" to industrial regulation and supply adjustments in Xi's third term in office.
Stabilising China's property and stock markets
Restoring and maintaining the health of China's property and stock markets has been another core focus for Beijing in 2025.
The phrase "stabilising housing and the stock market" (稳住楼市股市) made its debut appearance in the general list of demands for 2025's Government Work Report, released in March at the Two Sessions congress.
A meeting of the Communist Party's Politburo convened at the end of April further called for "continuing to firm up the trend of property market stabilisation," as well as "continuing to stabilise and invigourate capital markets."
Chinese policymakers have opined that boosting the health of these key asset markets can expand domestic demand, by creating wealth effects that make households more inclined to consume.
Beijing's efforts to achieve the goal of stabilising these markets has faced stern challenges in 2025, however.
China's stock market has endured a spate of intense volatility since Trump's Liberation Day tariffs, while its housing market remained stuck in the doldrums through the first half.
The ailing state of China's property market has eased but continued into 2025. The value of new dwellings has fallen on-month at a monthly average of -0.2%, while for pre-owned homes the decline has been at a rate of -0.4%.
Both these clips nonetheless mark a narrowing of 0.3 percentage points compared to the average monthly rate of decline in 2024.
Beijing signalled its concern with the condition of the property market at a meeting of the State Council held in June, as well as the launch of concerted policy measures in the second half.
It flagged the need for a "multi-pronged approach to stabilising expectations, spurring demand, optimising supply, dissolving risk, and more vigorously driving a stop to the decline of the housing market and a return to stability."
The phrase "even more vigorously" (更大力度) is considered especially telling by China's top prognosticators of Beijing's economic policy plans.
Wang Xiaosong (王孝松), economics professor at Beijing's Renmin University, expects the launch of a raft of forceful property-stabilisation policies in the second half.
These could include the loosening of market restriction measures in first-tier Chinese cities, and "optimisation" of land reserve policies.
Lian Ping (连平), director of China Chief Economist Forum, has called for moderate reductions to mortgage rates, as well as adjustments to preferential fiscal and tax policies for personal dwellings.