Fundamental trends sustaining long-term growth

The much-anticipated Central Economic Work Conference was held from Dec 10 to 11 in Beijing. Based on a comprehensive assessment of the domestic and international economic landscape, the meeting clearly stated that the underlying conditions and fundamental trends sustaining China's long-term economic growth remain unchanged, while stressing that it will adhere to the general principle of pursuing progress while ensuring stability, and better coordinate domestic economic work with struggles in the international economic and trade arena. That closely aligns with recent assessments by several international institutions.

In the fourth quarter of 2025, a number of major international institutions raised their forecasts for China's full-year economic growth. Among them, the International Monetary Fund, Goldman Sachs and Deutsche Bank have all revised their projections for China's 2025 growth to 5 percent, broadly expressing optimism about China's technological development and the continued expansion of exports.

This is more than a routine update to economic forecasts. It places a critical judgment under the global spotlight. After undergoing multiple "stress tests" — including a deep adjustment in the real estate sector, volatility in external demand and persistent geopolitical tensions - China's economy has once again seen its "notable resilience" affirmed by major international institutions. The upward revisions resemble a decisive rebound of a needle on a finely calibrated economic instrument, and their signaling value far exceeds the numbers themselves. They indicate that amid a complex and challenging internal and external environment, China's vast economic system has not only remained stable in operation, but is also generating new internal balances and sources of momentum.

This widely recognized "economic resilience" is no accident. It stems from a multilayered and systemic support framework that is being built and refined.

First, the "stabilizer" role of macroeconomic policy has become more targeted and patient. Unlike past episodes of large-scale stimulus, the current policy framework places greater emphasis on "measured, drip-style support" and managed expectations. Monetary policy, while maintaining reasonably ample liquidity, has focused on the use of structural tools to guide financial resources toward technological innovation, green transition and small and micro businesses. Fiscal policy, meanwhile, seeks a difficult but necessary balance between supporting aggregate demand and preventing risks by improving spending efficiency, implementing targeted tax and fee reductions, and steadily advancing plans to defuse local government debt risks. This policy resolve — avoiding abrupt turns and refraining from adopting a deluge of strong stimulus policies — has provided markets with a predictable policy environment and prevented the economy from falling into a cycle of sharp "overheating followed by tightening" episodes, triggered by aggressive stimulus moves.

Second, new engines of growth are accelerating and partially offsetting the slowdown in traditional drivers. "New quality productive forces" have rapidly moved from concept to tangible contributions to economic growth. In high-end manufacturing, exports of the "new trio" - new energy vehicles, lithium batteries and photovoltaic products - have been robust, not only securing key positions in global supply chains, but also driving comprehensive upgrading across related domestic industrial chains. Integration of the digital economy continues to deepen, with artificial intelligence, big data and the industrial internet reshaping every stage from production to consumption, and enhancing total factor productivity. Massive investment in the ongoing green transition has generated sustained demand in areas such as renewable energy, power grid upgrades, energy conservation and environmental protection. High growth in these emerging sectors has effectively cushioned the drag from declining real estate investment, enabling dynamic rebalancing of the economic structure.

Finally, a supersized market provides unique buffering capacity and iterative scenarios. China's market of more than 1.4 billion people, including over 400 million middle-income consumers, offers unparalleled depth. When external demand fluctuates, the domestic consumer market has demonstrated strong foundational support. Consumption upgrading and innovation in niche markets coexist, from quality-oriented "self-pleasing consumption" to value-for-money, rational consumption, both giving rise to new business models. Progress in building a unified national market aims to remove internal bottlenecks in circulation, allowing scale and network effects of this vast market to be more fully realized, and providing ample room for experimentation, innovation and growth for enterprises and industrial upgrading.

While these upward revisions are based on rigorous, model-driven quantitative analysis, they reflect a subtle yet important shift in international institutions' perceptions of China's economy — gradually moving from a period of "concern-dominated" views toward "cautious optimism" or "wait-and-see confirmation".

This reassessment rests on several key observations.

First, since the third quarter, high-frequency economic indicators have broadly stabilized or even shown modest improvement, with indicators such as industrial output and corporate profits performing better.

Second, clearer roadmaps have emerged for addressing risks in key areas. In particular, with regard to real estate and local government debt, a series of gradual and market-oriented resolution measures are being implemented step-by-step, and the "firewalls" against systemic risks are increasingly viewed as more robust.

Third, Sino-US relations have shown signs of temporary easing, with more high-level interactions in recent periods. Although structural frictions persist, marginal improvements have helped stabilize global business expectations and partially eased anxieties over supply chain relocation.

The latest forecasts from these international institutions have undoubtedly benefited from a marginal reassessment of the effectiveness of China's policy space and the economy's endogenous capacity for self-repair. They convey a message to global markets that China's economy may have passed the phase in this adjustment cycle marked by the most pessimistic expectations and the most concentrated release of downward pressures, and is now seeking to establish a new growth platform — one with slower but more sustainable growth.

That being said, acknowledging resilience by no means implies ignoring the serious challenges that still lie ahead. IMF reports inevitably include warnings about these risks. The foundation of the current economic recovery and improvement still needs to be consolidated, and the "stress tests" facing the economy are far from over.

First, the momentum of spontaneous expansion in domestic demand remains insufficient. While consumer confidence and corporate investment intentions have improved, they have yet to form a strong, self-reinforcing cycle. Pressures on youth employment and the ongoing repair of household balance sheets will take time, constraining a rapid rebound in consumption. The long-term confidence of private enterprises to "dare to invest, be willing to invest, and be able to invest" requires continued, substantive improvements in the institutional environment, including property rights protection, fair competition and stable expectations.

Second, the transitional pains of the real estate market are far from over. The shift from the old model of "high debt, high leverage and high turnover" to a new development model will be long and painful. How to digest existing housing inventory, ensure project delivery, restructure the industry and reignite reasonable demand for upgraded housing -without triggering major financial risks — will be a prolonged test of policy wisdom and endurance.

Third, the complexity and severity of the external environment continue to intensify. Geoeconomic strategies centered on "de-risking" or "decoupling" persist, and competition arising from the restructuring of global industrial chains is increasing. Uncertainty surrounding monetary policies in major economies could also generate new external shocks through capital flows and exchange rate channels.

In sum, the decision by these international institutions to raise their forecasts for China's 2025 economic growth is a symbolic economic event. It signifies that after a succession of stormlike shocks, the international community has recognized both the inherent strength of China's economy — "a large ship capable of withstanding strong winds and waves" — and the policy efforts underway to "recalibrate the course" in complex waters. This closely aligns with the Central Economic Work Conference's emphasis, and provides positive external validation for China's economy to move steadily and sustainably along a path of high-quality development into 2026.

The writer is former director of the Market and Price Research Institute of the National Development and Reform Commission.

The views do not necessarily reflect those of China Daily.