Bolder steps likely to boost demand
China may soon reinforce its commitment to stabilizing growth with bolder, innovative measures aimed at promoting a consumption-driven recovery, as weak domestic demand continues to weigh on corporate profits, said leading economists and analysts.
They said such efforts would not only bolster confidence in achieving the country's full-year growth target, but also enhance the appeal of Chinese equities, which have increasingly emerged as a safe haven for global investors amid heightened international market volatility.
In an exclusive interview with China Daily, Liu Qiao, dean of Peking University's Guanghua School of Management and a professor of finance, said that "bold attempts" in fiscal policy could hold the key to addressing weak consumer confidence and promoting a recovery in domestic demand.
New policy tools worth considering in the second half of the year, Liu said, include fiscal transfers or cash subsidies for low-income groups, broadening consumption incentives like trade-in programs beyond traditional big-ticket items to everyday spending and services, and greater central government support for fertility and childcare.
"With proactive fiscal measures — such as the issuance of special central government bonds or a modest increase in fiscal deficit with spending focused on boosting consumption, China is well-positioned to meet its full-year growth target of around 5 percent," he said.
Latest economic data has pointed to the need for further policy easing to address sluggish demand. China's major industrial enterprises saw their total profits drop 1.1 percent year-on-year during the first five months, following a 1.4 percent growth in the first four months, the National Bureau of Statistics said on Friday.
The NBS attributed the decline to insufficient demand, falling industrial prices and short-term factors.
Acknowledging the challenges of insufficient domestic demand and low price levels, the People's Bank of China, the country's central bank, said on Friday that it will strengthen counter-cyclical adjustments and reduce the cost of comprehensive social financing while maintaining the stability of the capital market and the real estate sector.
Also pointing to a growth stabilization stance, the National Development and Reform Commission said that the country will roll out a third batch of consumer trade-in subsidies in July as scheduled, while accelerating the rollout of enhanced interest subsidy policies for equipment upgrade loans.
Allen Lee, head of China business development at global investment firm AllianceBernstein, said he expects the country to pursue targeted stimulus measures to support the transition from traditional growth drivers — like infrastructure and exports — toward consumption upgrading and advanced manufacturing.
The likely rollout of additional measures, coupled with A-share listed companies' governance reforms and improving shareholder return, means that China's equity market may be entering a positive phase of earnings recovery and valuation improvement, Lee said.
"While structural challenges and external uncertainties persist, ongoing reform efforts and the gradual recovery of endogenous growth momentum suggest a more sustainable economic rebound could emerge in the second half of 2025," Lee said.
Also expecting stronger policy easing in the second half, Goldman Sachs has maintained its overweight call on A shares and H shares, forecasting a double-digit rally in the CSI 300 Index to 4,600 points by year-end. The index went down 0.61 percent to close at 3,921.76 points on Friday.
