The latest policy tone set by the Political Bureau meeting! Eight key highlights address the real estate market, capital markets, monetary policy, and more.

Authors: Jiang Dan, Cheng Dan, He Juesi, Sun Lulu, Qin Yanling, Han Zhongnan, Guo Bohao, Zhang Da

Compared with the Central Political Bureau meetings in April and July of last year, as well as the Central Economic Work Conference in December of last year, this meeting introduced a new requirement for the tone-setting of macro policies in the next phase, emphasizing 'precise and effective' measures while continuing to stress efforts on 'four stabilities' (stable employment, stable enterprises, stable markets, and stable expectations). The key tasks continue to focus on tapping the potential of domestic demand and building a modern industrial system, highlighting the promotion of consumption upgrades and strengthening the construction of new infrastructure such as the 'six major networks.' It explicitly called for maintaining a reasonable proportion of manufacturing, thoroughly addressing 'internally competitive' practices, and improving artificial intelligence governance. Additionally, regarding the prevention and resolution of risks in key areas, stabilizing the real estate market, tackling overdue payments to enterprises, and enhancing confidence in the capital market were reiterated.

Several interviewed experts noted that, given the strong start of the economy in the first quarter, the current focus is on 'fully utilizing' the existing stock of policies already introduced to ensure the full release of policy dividends. The overall economy is in a moderate recovery process, with some improvement in intrinsic forces but still relatively weak. Consequently, macroeconomic policies need to remain proactive to sustain the momentum of continued economic recovery.

Key Point One: A Strong Start, Balancing Stability and Progress While Deepening High-Quality Development

The meeting acknowledged that since the beginning of this year, China's economy has started strongly, with major indicators surpassing expectations, demonstrating remarkable resilience and vitality. At the same time, it emphasized that the foundation for sustained and steady improvement in the economy still needs further consolidation, calling for bolstered confidence and more substantial and concrete measures to manage economic work.

Zeng Gang, Dean of the CityDev Research Institute at East China Normal University, stated in an interview with reporters that the statements 'major indicators surpassing expectations' and 'foundation still needing further consolidation' together form an optimistic yet cautious evaluation of the economic situation, signaling to the market that policies will remain stable.

Ming Ming, Chief Economist at CITIC Securities, told reporters that the positive trend in China's economy remains unchanged, and with the continuous promotion of various favorable policies, China is expected to achieve its annual growth target smoothly.

The meeting, focusing on the broader context of high-quality development, anchored in the new development philosophy and the construction of a dual-circulation pattern, coordinated development and security. It provided overall arrangements for the next stage of economic work from aspects such as deepening reform and opening up, achieving self-reliance in science and technology, and ensuring the autonomy and controllability of industrial chains.

Ming Ming believes that the overall deployment balances short-term growth stabilization with long-term transformational development, with a steady pace and clear direction.

Xiao Ruoshi, Associate Researcher at the Strategic Development and Planning Research Office of the Economic Forecasting Department of the National Information Center, told reporters that the meeting signaled that macroeconomic regulation will become more precise. From the perspective of consumption, service consumption has been given a more prominent position; from the perspective of investment, it clearly strengthens the direction of investments in water networks, new power grids, computing power networks, and other infrastructure, which will help further unleash developmental potential. At the same time, the concept of 'systematically responding to external shocks' was proposed. This year, uncertainty in the international energy market continues to increase, impacting China's energy security, price stability, and agricultural production. This meeting proactively laid out strategies to comprehensively address changes in the external environment, providing solid policy support for the steady and sustained progress of China’s economy.

Zeng Gang stated that the meeting proposed to 'strengthen the internal driving force of economic development,' following the approach of coordinated regional development. This requires enhancing the leading functions of the three major growth poles, activating cross-regional factor mobility, and supporting deepened inter-regional collaboration through integrated cooperation in government, industry, academia, research, application, and finance. It also involves restructuring inter-regional cooperation models and achieving breakthroughs in areas such as regional innovation communities and industrial cluster construction.

Key Focus Two: Fiscal policy maintains strong expenditure on people's livelihoods and accelerates the progress of clearing overdue payments.

Regarding the implementation of fiscal and monetary policies, this meeting emphasized 'precision and effectiveness,' clearly stating the need to 'fully utilize macroeconomic policies' and 'evaluate the consistency of macroeconomic policy directions.'

Yang Zhiyong, President of the Chinese Academy of Fiscal Sciences, recently told reporters that although the implementation of macroeconomic policies adapts to changing circumstances, the overall goal remains consistent: focusing on how to play a more proactive and effective role. It is essential to solidly implement existing policies while recognizing room for optimization, making timely adjustments based on specific issues encountered during implementation.

In the first quarter of this year, a more proactive fiscal policy took effect early, with fiscal expenditure reaching a three-year high. The issuance of new special bonds maintained a relatively fast pace. A package of policies promoting domestic demand through fiscal and financial synergy was implemented, along with pilot programs for prize-winning invoices, strongly supporting the robust start of economic operations. Recently, the issuance of ultra-long-term special treasury bonds has begun, with market institutions generally optimistic about the intensification of fiscal policy, indicating ample tools remain in the fiscal policy toolkit.

According to the arrangements of this meeting, in the next phase, China will continue to optimize the structure of fiscal expenditures and safeguard the bottom line of 'three guarantees' at the grassroots level. This means fiscal funds will continue to be heavily directed toward people's livelihood areas. Given that health care expenditures and social security and employment expenditures have maintained rapid growth in the first quarter, and considering the meeting's signal to push for the commencement of more major projects, Associate Professor Wang Feng of the China Public Finance Research Institute at Shanghai University of Finance and Economics pointed out that fiscal spending on people’s livelihood protection is expected to remain at a high intensity in the second quarter, albeit with potentially slower marginal growth to make room for expenditures in other areas such as infrastructure.

Preventing and resolving local government debt risks remains a critical task for the fiscal system. This meeting further required orderly resolution of local government debt risks and focused efforts on addressing arrears owed to enterprises. In response, Zhang Lin, Deputy Director of Far East Credit Rating Research Institute, told reporters that the current phase of hidden debt replacement and resolution is nearing its conclusion, and local debt reduction methods will shift from primarily fiscal solutions to predominantly market-based ones, especially accelerating the orderly reform and transformation of urban investment platforms.

Although the issuance progress of replacement bonds in the first quarter lagged behind the same period last year, the scale of 'special newly added special bonds' mainly used for clearing arrears exceeded that of the previous year. The Ministry of Finance recently clarified that some newly issued special bonds in the first quarter were used to 'support the clearance of government arrears owed to enterprises.' 'Clearing arrears,' as a key to unblocking circulation, aims to activate the cash flow 'capillaries' of microeconomic entities, transmitting policy effects to both investment and consumption, and strengthening the operational resilience of these entities, according to Pang Ming, a specially appointed senior researcher at the National Institution for Finance and Development.

Key Focus Three: Monetary policy seeks greater 'precision,' maintaining abundant liquidity.

According to the arrangements of this meeting, in the next phase, a moderately loose monetary policy will not only pursue greater 'precision and effectiveness' but also enhance 'forward-looking flexibility and targeting' while maintaining abundant liquidity.

Ming Ming stated that, under the requirement of 'precise and effective' measures, the People's Bank of China may increase its support for structural monetary policy. At the same time, given the high frequency with which the phrase 'maintain ample liquidity' has appeared in several recent important contexts, it is expected that liquidity will remain in a relaxed state in the future.

"The overall policy tone remains unchanged, but the use of policy tools will be more methodical and timing-sensitive." Dong Ximiao, Chief Economist at China Merchants Union, told reporters that in practice, the central bank will make rapid adjustments based on immediate market reactions—if economic data shows an unexpected decline in the future, the central bank may promptly implement comprehensive reserve requirement ratio cuts and interest rate reductions; if the market operates steadily, it will rely more on structural monetary policy tools to provide targeted support to key areas and weak links.

Hui Shan, Chief China Economist at Goldman Sachs, stated that the central bank is expected to maintain ample liquidity in the second quarter to manage risks and will not rush to cut policy interest rates; fiscal policy will maintain the current tone but retain room for further action if necessary, such as leveraging the role of policy banks as 'quasi-fiscal' instruments.

This meeting also touched upon exchange rate management, reiterating the importance of "maintaining the basic stability of the renminbi exchange rate at a reasonable and balanced level." Hui Shan noted that China’s financial markets have demonstrated significant resilience against external shocks. Since the end of February, the renminbi has appreciated against both the US dollar and a basket of currencies. The ongoing transformation of China's economy from construction and real estate toward manufacturing and business services provides strong support for an optimistic outlook on the renminbi. However, due to the high emphasis on growth and market stability, policymakers will carefully manage the pace of appreciation to prevent one-sided capital flows and excessive pressure on exporters.

Wen Bin, Chief Economist at Minsheng Bank, told reporters that since the beginning of this year, despite the strengthening of the US Dollar Index, the renminbi has continued to appreciate against the US dollar. However, if the exchange rate becomes too strong, it could reduce the competitiveness of export products. Against the backdrop of a reduced likelihood of reserve requirement ratio cuts and interest rate cuts in the short term, the central bank will guide the exchange rate to remain basically stable through other policy tools.

Key Point Four: Equal Emphasis on Goods and Service Consumption, Deepening Investment Potential

Boosting domestic demand remains a top priority in the current macroeconomic agenda, with this meeting further emphasizing the need to 'deeply tap into the potential of domestic demand.'

Specifically, two key aspects deserve attention. On one hand, the trend of upgrading both goods and service consumption is becoming increasingly evident. Among these, service consumption, characterized by rich price gradients, lower consumption thresholds, and higher consumption frequency, demonstrates stronger growth potential—data from the first quarter alone show that the growth rate of service retail sales was 3.3 percentage points faster than that of goods retail sales during the same period.

Unlike goods, services often exhibit inseparability, meaning production and consumption occur simultaneously. In this context, supply plays a critical role in fully unleashing service consumption demand. Therefore, this meeting not only proposed to 'expand the supply of high-quality goods and services' but also reiterated the need to 'vigorously implement actions to enhance and upgrade the service sector,' using improved supply to drive demand release.

On the other hand, regarding investment, the meeting specifically pointed out the need to 'strengthen the planning and construction of water networks, new power grids, computing power networks, next-generation communication networks, urban underground pipeline networks, and logistics networks' and to 'promote the commencement of major projects with mature conditions.'

Yin Yanlin, a member of the National Committee of the Chinese People's Political Consultative Conference, stated that in the first quarter of this year, the growth rate of fixed asset investment turned from negative to positive, but the overall downward pressure remains evident. To achieve the annual economic growth target, expand domestic demand, and promote reasonable price recovery, investment must be strengthened this year.

In terms of funding sources, the National Development and Reform Commission has indicated that it will allocate over 1.75 trillion yuan in government investment funds (755 billion yuan in central budgetary investment and 1 trillion yuan in ultra-long-term special treasury bonds) by the end of June. This meeting further clarified the 'six networks' as investment directions.

During this year’s Two Sessions, Zheng Shanjie, Director of the National Development and Reform Commission, mentioned the investment potential in these 'six networks' and key areas—according to preliminary estimates, investments in these areas will exceed 7 trillion yuan this year.

In addition to government investment funds, the stabilizing role of social capital in investment is indispensable. Yin Yanlin suggested accelerating the deployment of 800 billion yuan in new policy-based financial instruments to drive social capital investment. To maintain investment momentum and consolidate the stabilization trend, it is also necessary to actively study plans for appropriately increasing ultra-long-term special treasury bond arrangements for subsequent investment projects in the second half of the year, to address the issue of insufficient funding.

Key Focus Five: Deepening the campaign against 'internally competitive' practices.

Accelerating the construction of a modern industrial system is one of the key tasks identified for the next phase in this meeting. It emphasized maintaining a reasonable proportion of manufacturing, advancing the construction of a unified national market, and deepening the campaign against 'internally competitive' practices.

Wen Bin stated that 'maintaining a reasonable proportion of manufacturing' is one of the goals of the '15th Five-Year Plan,' but it was not mentioned in the Central Economic Work Conference at the end of last year or in this year’s Government Work Report. The emphasis in this Politburo meeting highlights the decision-makers’ high regard for manufacturing and the real economy, reflecting a policy approach focused on stabilizing growth and adjusting structure through industrial upgrading.

It is particularly noteworthy that the focus on addressing 'internally competitive' practices has shifted from the 'comprehensive' stage to the 'in-depth' stage. In response, Xiao Hongwei, Director and Researcher of the Policy Simulation Laboratory at the Economic Forecasting Department of the National Information Center, told Securities Times that this is not merely a change in wording but a fundamental upgrade in governance thinking, moving from outcome correction to source control.

Xiao Hongwei pointed out, 'It must be recognized that some localities are currently trapped in an 'internally competitive' dilemma of subsidy-driven investment promotion, with illegal tax incentives and fiscal subsidies persisting despite repeated bans, directly fragmenting the unified national market.' He believes that the essence of deepening the campaign is not to restrict competition but to bring competition back to the right track of quality, innovation, and efficiency.

However, the situation of 'internal competition' in some industries has already begun to change, with photovoltaic and new energy vehicle sectors being typical examples; the futures price of polysilicon has rebounded significantly from 30,000 yuan per ton to over 50,000 yuan per ton.

Xiao Hongwei predicted that subsequent policy trends will unfold across multiple dimensions. It is necessary to expedite the introduction of the 'Regulations on the Construction of a Unified National Market,' establish a 'negative list' management system for local investment promotion, and reform the fiscal, taxation, and ranking evaluation mechanisms. This will compel local governments to shift from 'competing on incentives' to 'competing on services and environment,' eliminating 'pseudo-internal competition' at the institutional source.

Key Point Six: The Intelligent Economy Reconstructs Industrial Value Chains

The meeting clarified that the 'AI+' initiative should be fully implemented to develop new forms of the intelligent economy and improve artificial intelligence governance. This provides direction for the deep integration of artificial intelligence with economic and social development.

Zhu Keli, Founding Dean of the Guoyan New Economy Research Institute, stated to reporters that the new form of the intelligent economy uses artificial intelligence as its core engine, data as a key element, and computing power and algorithms as foundational support, achieving systematic leaps in total factor productivity in a 'native intelligent' new economic model. Artificial intelligence is no longer simply layered onto industries but aims to achieve full-chain penetration and empower all elements, driving the economy from 'digital overlay' toward 'native intelligence.'

The reconstruction of industrial value chains by the intelligent economy centers on a fundamental shift in value creation logic. In R&D, AI accelerates technological iteration; in production, intelligent control reduces costs and increases efficiency; in distribution, data enables precise supply-demand matching; and in services, intelligent agents facilitate proactive responses. Each link in the value chain is rapidly migrating toward high-value-added intelligent segments.

Zhu Keli pointed out that manufacturing, supported by complete industrial chains, is more conducive to the scaled implementation of smart factories. Consumer electronics, being close to end markets, can quickly iterate intelligent terminal products. Healthcare, driven by strong demand and high compliance requirements, highlights the value of AI-assisted diagnostics and drug discovery. Modern agriculture, with broad application scenarios and accessible data, enables AI to rapidly achieve full-process intelligence in cultivation, management, and distribution. These four sectors are expected to lead in forming transformation models, providing replicable paradigms for other industries.

Additionally, the accelerated deployment of large models, intelligent agents, and embodied intelligence unleashes the vitality of the intelligent economy, while governance challenges such as algorithmic bias, data misuse, and deepfakes emerge. Zhu Keli emphasized that improving the AI governance system is crucial for the long-term healthy development of the industry, focusing on four core values: setting rules to clarify responsibilities, rights, and safety standards; preventing risks by establishing early warning mechanisms to safeguard security baselines; promoting innovation by fostering a stable and predictable institutional environment to stimulate creativity; and building trust by enhancing public acceptance and strengthening societal foundations for applications, ultimately achieving maximum development under safe and controllable conditions.

Key Point Seven: Stabilizing and Strengthening Capital Market Confidence, Reforms Expected to Advance Further

The meeting proposed stabilizing and strengthening capital market confidence, setting the tone for market priorities. Tian Lihui, Professor of Finance at Nankai University, stated that recent international developments have caused fluctuations in capital markets but have not altered their long-term positive trend. Subsequent policies will continue to enhance the confidence of various market participants by increasing the inflow of medium- and long-term funds, improving the quality of listed companies, and deepening reforms.

Currently, capital markets are generally stable and trending positively. To improve market resilience and stabilize expectations, Tian Lihui emphasized that, on one hand, stability must remain the priority, with strict supervision and regulation to consolidate steady progress. On the other hand, through reform, institutional inclusiveness, adaptability, competitiveness, and attractiveness must be enhanced to strengthen internal market stability.

Since the beginning of this year, the CSRC has continued to promote the entry of medium- and long-term funds into the market, broadening the channels and methods for such funding sources. At the same time, it has enhanced the inclusiveness and adaptability of the multi-level equity market, initiated reforms to deepen the ChiNext board, and continuously improved the quality and effectiveness of services for high-quality development. It has also cracked down on financial fraud, price manipulation, insider trading, and other illegal activities, strengthening the effectiveness and deterrent power of regulatory enforcement. These measures have helped achieve a qualitative improvement and reasonable quantitative growth in the capital market, further consolidating the positive momentum of market recovery.

Li Xunlei, Chief Economist at Zhongtai International, pointed out that the stable operation of the capital market cannot be separated from the support of listed companies' profits. To ensure sustainable growth in the profitability of listed companies, the first step is to expand demand, particularly consumer demand. The second is to accelerate the pace of survival of the fittest, ensuring delisting where appropriate, thereby significantly reducing the number of loss-making companies. The third is to increase the pace of mergers and acquisitions so that only the largest enterprises have pricing power, enabling them to raise factory prices and improve return on net assets.

Tian Lihui noted that subsequent reforms in the capital market are worth anticipating. On the funding side, medium- and long-term funds should become the ballast stone, changing the market's over-reliance on short-term funds, which creates a fragile structure. On the asset side, the quality of listed companies should be improved, with strict controls at the entry point and smooth exits, making dividend payouts and share buybacks the norm so that investors have stable return expectations. On the institutional side, counter-cyclical adjustment mechanisms should be improved, forming a set of rules in areas such as trading mechanisms, leverage constraints, and risk hedging tools that allow the market to self-correct.

Highlight Eight: Urban renewal will become an important force in stabilizing the real estate market.

This meeting’s statement on real estate remains within the framework of preventing and resolving risks in key areas, explicitly emphasizing 'efforts to stabilize the real estate market and steadily advance urban renewal,' underscoring the central government's focus on stabilizing the property market.

Yu Xiaofen, Dean of the China Housing and Real Estate Research Institute at Zhejiang University of Technology, stated in an interview that real estate remains a critical area in preventing and resolving risks in key sectors. A stable property market is crucial to the broader economic landscape, local fiscal health, and livelihood guarantees. Regions must continue to adhere closely to the main theme of 'controlling increments, reducing inventory, and optimizing supply,' implementing targeted policies and reinforcing the foundation.

In the first quarter, core city property markets showed sporadic signs of recovery, with ongoing market differentiation, while the national market overall remained in the process of bottoming out. Relevant officials from the China Index Academy believe that this Politburo meeting sent a positive signal, with macro policies expected to maintain significant strength in the second quarter to further consolidate the foundation of sustained and steady economic improvement.

In Ming Ming’s view, this Politburo meeting provided clear guidance on real estate policy, setting 'stability' as the bottom line and 'renewal' as the main thread. Through localized policy adjustments and urban renewal as dual drivers, a new development model will be constructed.

Yu Xiaofen remarked that as real estate enters the era of existing assets, urban renewal has become a vital force in stabilizing the real estate market. By revitalizing existing assets, addressing shortcomings in public welfare, empowering industrial development, and alleviating inventory pressures, real estate can achieve higher-quality development.

Wang Ruimin, a researcher at the Development Research Center of the State Council, told reporters that stabilizing the real estate market is a foundational condition for a smooth transition between old and new models of real estate. It requires reconstructing the production function of the real estate industry, with supply-side factor market-oriented reforms being the top priority. 'Good houses' essentially stem from the re-pricing and re-combination of supply-side factors, allowing both long-time residents and new arrivals to move up the housing ladder and find new value-for-money options in housing product iterations, thus restoring the virtuous cycle between real estate development and household income growth.

Li Yujia, Chief Researcher of the Housing Policy Research Center of Guangdong Province, also stated that this meeting combines market stabilization with urban renewal. In the long term, the key to stabilizing the real estate market lies in the progress and effectiveness of urban renewal.

Editor/Lambor