Communist Party polishes up its pre-set trade war game plan
The latest Politburo meeting reaffirms established policy settings.
On 25 April, the Communist Party’s Politburo held its first major meeting since Donald Trump roiled global markets with the launch of his Liberation Day tariffs.
While its official rhetoric may have ratcheted up, the Party appears to have simply reaffirmed economic policy settings that were put in place earlier to deal with the likely contingency of heightened trade aggression from Washington.
These include plans for more active fiscal and monetary policy in 2025, alongside a heightened focus on the expansion of China’s domestic demand and consumption to compensate for weak exports.
Rhetorical adjustments
The Politburo made reference for the first time to an “international economic and trade struggle” (国际经贸斗争), while also highlighting the need to deal with “the expanded influence of external shocks.”
According to a report from China Central Television, the phrase “international economic and trade struggle” serves to “reflect the central government’s latest judgement of the severity, length and difficulty of current economic circumstances.”
Domestic commentators point in particular to the unveiling of two key policy slogans by the Politburo in the wake of Trump’s trade aggression:
The “Two Unshiftings” (两个坚定不移), and
The “Four Stabilisations” (四稳).
China as the “unshifting” champion of globalisation
The Two Unshiftings involve “unshiftingly seeing to our own affairs well, and unshiftingly expanding high-level external opening.”
Zhu Min (朱民), expert councillor from the China Center for International Economic Exchanges, says the Two Unshiftings simply refers to further globalisation and the opening up of the Chinese economy in tandem with structural re-balancing - both policy settings already place.
One difference may lie, however, in Beijing seeking to capitalise upon the international upset caused by Trump’s protectionism by positioning itself as the champion of free trade and globalisation, and improving its own ties with other economies.
“Faced with the Trump administration’s unilateral trade war, China must uphold globalisation and humanity as a community with a common fate,” Zhu said.
“In this regard, China must continue to open up, as well as guide future globalised development.”
“Amidst the advance of international trade protectionism, China has become an active advocate and vigorous supporter of globalisation,” said Zhang Monan (张茉楠), researcher at the China Center for International Economic Exchanges.
“[China] is using its more open markets to attract global resources, as well as provide a more open platform for global partners to cooperate, and a more stable anchor for growth.”
The Four Stabilisations
The April meeting of the Politburo also highlighted the need for the “Four Stabilisations” of “stable employment, stable enterprises, stable markets, and stable expectations.”
China Central Television said the Politburo’s April meeting marks the first time it’s made reference to the “Four Stabilisations,” and that this “sends an intense signal on firmly stabilising the overall economy.”
Zhu Min said the phrase simply serves to stress the focus of policymakers on dealing with the fallout of Trump’s trade war for jobs and businesses in China.
“What has been placed at the forefront? Stabilisation of employment and enterprises,” Zhu said.
“Experience tells us that when trade wars begin, foreign export enterprises are directly affected.
“During this process, it’s especially important to promptly unveil policies, including those for stabilisation of employment and enterprises, to help enterprises to gradually adjust and settle.”
Continuity of precautionary fiscal and monetary policy
Broad consensus amongst Chinese commentators is that the Politburo’s latest round of sloganeering simply points to the maintenance of fiscal and monetary policy settings already established last year, to deal with flagging growth as well as in anticipation of Trump’s trade aggression.
China first unveiled a raft of “quantitative increase policies” in September, to bolster an economy still struggling with a slump in the property sector and lacklustre domestic demand.
Following Trump’s election victory, Beijing stepped up the scale of its fiscal and monetary stimulus plans at the Central Economic Work Conference held in December, highlighting a focus on growth in domestic demand and consumption.
The April meeting of the Politburo serves to reaffirm these themes, in the same way that the Two Sessions congressional event of March did, even prior to Trump’s Liberation Day tariffs.
“The meeting sends a very important message, which is that China has made full preparations and has arrangements in place,” Zhu Min said.
Wei Qijia (魏琪嘉), chair of the Industrial Economy Research Office of the National Development and Reform Commission’s State Information Office, also said that China “seeing to its own affairs well” would entail the continued implementation of policies launched previously to deal with the potential headwaters of a second Trump presidency.
“This requires us to properly implement relevant policies that have already been introduced,” Wei said.
“Specific measures introduced in all areas embody the continuity and stability of policy, and continuity and stability are used as a buffer to deal with the uncertainties of the external environment.
“This is the strength of policy.”
Li Xuesong (李雪松), researcher from the Chinese Academy of Social Sciences, said Beijing still needs to make good on this signalling, and that it still has “a large amount of room at present for fiscal policy.”
“It needs to accelerate the issuance of local government special-purpose bonds and ultra-long-term special Treasuries, so that they can form a material work volume as quickly as possible.”
Li reiterated the Chinese central bank’s call for cuts to interest rates and the reserve ratio when opportune, while pointing to “considerable room for execution” when it comes to monetary policy.
Zhu Min also highlighted the continued use of credit guidance via “structured monetary policy tools,” as another way in which the central bank can help China to withstand the impacts of a Sino-US trade freeze.
“Structured monetary policy is the special, focused use of monetary policy to support industries in need of it,” Zhu said.
“In future, when waging the trade war, supporting small and medium-sized enterprises will become especially important, so structured monetary policy is also very important.
“[It will] play a key role in the financial support of enterprises.”
Consumption remains the key focus
The Politburo also signalled a continued focus on the “comprehensive expansion of domestic demand” as one of China’s key policy missions for 2025, consistent with announcements made in December at the Central Economic Work Conference.
The April meeting of the Politburo called for “raising the incomes of high, medium and low-income demographics, vigorously developing services consumption, and strengthening consumption in its role as a driver of economic growth.”
The meeting also highlighted the need to “clear out as soon as possible restrictive measures in the area of consumption,” while also mandating the establishment of re-loans for services consumption and aged care.
Zhang Monan said boosting consumption has been a key preoccupation for Beijing since the pandemic, with a mounting focus on growth in “high-quality” services consumption.
In 2024, services consumption comprised 46.1% of per capita consumption expenditures in China - a level significantly below that of developed economies.
“In recent years, China has actively driven a development strategy of expanding domestic demand, and the most important part of expanding domestic demand is expanding consumer demand,” Zhang said.
“In the past, the focus was more on satisfying the needs of everyday people for clothing, food, accommodation and travel.
“Continual growth in high-quality services and high-quality supply is of benefit to expediting growth in domestic consumer demand.”