EconoScope | Positive cycle of investment, consumption ensures growth: expert

At China’s annual Central Economic Work Conference (CEWC) last week, vigorously boosting consumption, improving investment efficiency, and expanding domestic demand on all fronts were set as key economic priorities for 2025.

Similarly, the national work conference, held by the National Development and Reform Commission (NDRC) on last Friday, called for capitalizing on construction funds to enhance investment efficiency.

It further suggested boosting consumption through a fresh round of large-scale equipment upgrades and trade-in of consumer goods, to boost domestic demand and support growth, said Sheng Lei, deputy director of the Investment Research Institute of NDRC.

With growing global challenges, it is crucial for China to balance the short-, medium-, and long-term roles of investment to foster a positive cycle of investment and consumption, ensuring stable economic development.

Investment plays key role in 2024, with notable achievements

Despite external challenges, China’s fixed-asset investment in 2024 has steadily grown and improved in structure, with policies gradually yielding effect. In the first 10 months of this year, China’s fixed-asset investment grew by 3.4 percent year-on-year, according to National Bureau of Statistics (NBS).

To begin with, government investment attracted additional private capital, driving tangible outcomes.

Around 6 trillion yuan ($824.37 billion) has been allocated to investment, including 700 billion yuan from central budgetary funds, 1 trillion yuan in ultra-long special treasury bonds, 3.12 trillion yuan in local government special-purpose bonds for project construction, and 1 trillion yuan in treasury bonds issued in 2023, according to NDRC.

By the end of October, two lists, each totaling 100 billion yuan, for 2025 construction projects related to major national strategies and key security capabilities, along with central budget investments, were also sent to local governments in advance.

All funds have been assigned to specific projects, while also attracting private investment, to ensure the implementation of major construction.

Moreover, China’s major policies have yielded results.

A total of 1,465 major projects aligned with major national strategies and key security capabilities have received 700 billion yuan in funding through ultra-long special treasury bonds, according to NDRC.

An additional 300 billion yuan has been allocated to support large-scale equipment upgrades and trade-in of consumer goods, boosting investment in equipment purchases and driving growth in the automotive, home appliance, and consumer goods sectors.

Industrial transformation and upgrading have shown prominent results.

In China, manufacturing investment grew by 9.3 percent, 0.1 percentage points higher than the first three quarters. Investment in high-tech industries from January to October grew by 9.3 percent, 5.9 percentage points higher than the total, according to NBS.

Operators conduct the remote control of smelting metal on Nov. 6, 2024, in Anhui Province, China.(Photo: China News Service/Han Suyuan）

Improving efficiency is crucial while increasing investment　

The year 2025 is the final year of China’s 14th Five-Year Plan (2021-2025) and the planning year for the 15th Five-Year Plan (2026-2030).

This requires China to drive growth in both the quantity and quality of investments, ensuring solid support, practical strategies, and sustained momentum, as demonstrated by the following points, Sheng said.

To begin with, China needs to coordinate its existing policies with a package of targeted incremental fiscal policy measures to expand effective investment.

Efforts should be made to aligning investment policies with growth targets, to foster an economy on an upward trajectory with better structure and sound momentum, the expert added.

Besides, China needs to increase the issuance of ultra-long special treasury bonds to support the implementation of major national strategies and the strengthening of security capabilities in key areas, as well as the fresh round of large-scale equipment upgrades and trade-in of consumer goods.

It also needs to moderately increase central budgetary investments and further optimize investment direction and structure to support fundamental, long-term projects in public welfare.

In addition, China needs to accelerate implementation of the 102 major projects in the 14th Five-Year Plan and outline key projects for the 15th Five-Year Plan in advance.

Currently, 92percent of the 5100 items in 102 major projects have either started or been completed, according to NDRC.

NDRC has established a regular project reserve system with local governments to strengthen coordination across regions and sectors, and enhance project preparation.

Furthermore, China needs to expand the use of local government special-purpose bonds, broadening funding areas.

Efforts should be made to explore pilot programs for project approval autonomy, and establish fast-track channels for ongoing projects.

Sheng suggested that China support the development of private investment.

To this end, it should improve mechanisms for private enterprises to participate in major national projects, and encourage more private capital in key infrastructure projects like railways, energy, and water conservancy, he said.

Investment, consumption mutually reinforce each other, driving new growth

Investments with reasonable returns and consumption supported by income can mutually reinforce each other within the national economic cycle.

At present, facing global opportunities and challenges, it is urgent for China to expand investment to grow and address its weaknesses.

First, based on basic research and core technology breakthroughs, China should seize opportunities in investing in major high-tech projects in emerging industries such as quantum information and AI, both of which are expected to become trillion-yuan sectors .

Moreover, China is at a pivotal stage of global industrial chain restructuring and modern industrial system development, with significant potential for industrial upgrades driven by advanced technology.

For example, in green transition, annual investment demand is estimated to exceed 10 trillion yuan. Leveraging digital and green technologies to upgrade traditional industries will provide strong momentum to develop new productive forces.

In addition, China is at a crucial stage of building a modern infrastructure system, with strong potential for investment.

Annual upgrades to infrastructure in transportation and energy are expected to reach three trillion yuan respectively.

Urban renewal will boost livelihoods, and drive consumption. Reducing logistics costs will strengthen national competitiveness and support economic growth.

Finally, China is focusing on addressing the challenges of unbalanced and inadequate development and improving quality of life, creating huge demand for investment in people’s livelihood.

Efforts should prioritize diversifying consumption scenarios, increasing service consumption, and promoting the growth of culture and tourism.

The urbanization of rural migrants is expected to generate trillions of yuan in new investment opportunities.

Additionally, sectors like winter sports and the silver economy will play a crucial role in linking investment with consumption.

Expanding effective investment will build future supply, support technological advancement, drive industrial upgrades, and enhance the ability to provide high-quality products and services. This will not only improve people’s livelihoods but also strengthen their sense of gain, happiness and security.