China's macro policy returns to calibrated expansion as peak transition pain passes

Editor's note: Lin G. is a CGTN economic commentator. The views expressed in this article are the author's own and do not necessarily reflect those of CGTN.

The conclusion of China's Central Economic Work Conference this year offers an important signal to the world through a noticeable recalibration of emphasis. For international observers, the most striking feature may not be what has been added, but what has been deliberately adjusted in tone. Compared with the conference held at the end of 2024, certain expressions – such as "extraordinary" macroeconomic measures or a strong emphasis on using expansion to stabilize growth – have been withdrawn. It reflects a clearer judgment: China's economy has moved beyond the most acute phase of its structural adjustment and is entering a stage where policy can return to a more normalized framework.

At the end of 2024, the conference emphasized the need for "unconventional" fiscal stimulus. Such language was appropriate at the time. China was navigating the most complex phase of its structural transition, facing pressures from slowing legacy sectors – most notably property-related industries and their upstream and downstream chains – alongside weak expectations in consumption and the lagged effects of past adjustments. The policy stance then was designed to ensure that overall stability would not be undermined while new growth drivers, particularly technology- and innovation-led industries, were still consolidating. Growth, in that context, was asked to play a more active role in anchoring stability, hence the emphasis on "using progress to secure stability."

This year, that language has evolved. References to "unconventional" measures have receded, replaced by a more measured articulation of maintaining necessary fiscal strength. The formulation has returned to "seeking progress while maintaining stability," and macroeconomic management is now described as strengthening both countercyclical and cross-cyclical adjustment.

The inclusion of cross-cyclical adjustment alongside countercyclical tools is particularly telling. It suggests that China's economic governance is no longer focused solely on buffering short-term fluctuations or preventing downside risks from intensifying. Instead, it reflects confidence that the period of concentrated downward pressure associated with structural rebalancing has largely passed. The task now is to smooth the transition into a healthier, more sustainable growth cycle, aligning short-term stabilization with medium-term development trajectories.

This assessment is grounded in tangible economic outcomes. Even during the most demanding phase of restructuring, China maintained growth of around 5 percent – a rate that would be considered high-speed in most major economies. What made this period feel difficult was not a collapse in aggregate performance, but the pronounced divergence across sectors. As rapid urbanization reached a natural plateau, industries closely tied to property development and large-scale construction entered a phase of contraction and cyclical adjustment, reflecting the inherent cyclicality of economic activity itself. Meanwhile, new industries, particularly those linked to advanced manufacturing, digital technologies, and green transformation, expanded rapidly. The resulting uneven distribution of growth shaped public perception, amplifying a sense of strain despite overall expansion.

Such "economic perception gaps" are a natural feature of structural transformation. Groups and regions tied to declining sectors inevitably feel pressure more acutely, and their experiences tend to weigh heavily on broader sentiment. By contrast, those benefiting from expanding industries often experience adjustment more quietly, with gains absorbed into daily activity rather than translated into public expression. As a result, periods of structural transition tend to generate a perceptual asymmetry, in which pressures are more visible than progress, creating a divergence between aggregate economic performance and lived economic sentiment.

As the sectors that once exerted the greatest downward drag complete their most intense phase of contraction, adjustment costs diminish and perceptual gaps naturally begin to narrow. Risks are now on a declining trajectory, unrealistic bubble expectations have been firmly corrected, and the space for further sharp declines has significantly narrowed.

Importantly, this stabilization has not been achieved by artificially propping up outdated capacities or postponing necessary exits. On the contrary, policy has required enterprises with past strategic misjudgments to bear the consequences of their decisions, while gradually releasing the broader systemic impact of their exit. The prolonged process, observed over several years, reflected not hesitation but a deliberate pacing intended to manage the ripple effects across the financial and economic system.

Over the past several years, the case of Evergrande Group has drawn extensive attention, with many external observers speculating whether the company would be fully rescued. In reality, policy intervention was never aimed at salvaging the firm itself; rather, it had focused on mitigating the systemic impact of its exit. Now, with the situation fully clarified, it is clear that the approach was designed to ensure that Evergrande bore the consequences of its past strategic misjudgments, while relevant stakeholders who participated in or enabled its rapid expansion also assumed their due responsibilities. The outcome demonstrates that the exit was effectively managed without destabilizing the broader financial and economic system.

At the same time, the momentum of emerging growth drivers – primarily in technology and other frontier sectors – has remained strong. These expanding industries no longer serve merely as compensatory forces offsetting declines elsewhere; they are increasingly capable of sustaining growth on their own. It is this reality that allows macroeconomic policy to transition from emergency, short-term measures to a calibrated, normalized stance. The emphasis on cross-cycle adjustment reflects a deliberate effort to avoid excessive stimulus that could give rise to new bubbles.

In this sense, this year's Central Economic Work Conference has done more than outlining tasks for the coming year: It signals that China has crossed the most difficult inflection point of its economic transformation. For the international community, this conveys a clear and essential message: China's economy has demonstrated a remarkable capacity to absorb profound structural shocks while maintaining both stability and growth.