Turning headwinds into tailwinds, resilient Chinese economy charges toward 14th Five-Year Plan culmination

BEIJING -- Buoyed by stronger-than-expected economic performance and steered by policy continuity and certainty, China is accelerating through the home stretch of the 14th Five-Year Plan (2021-2025) to lay a solid foundation for future high-quality development.

The first half of 2025 highlighted China's economic resilience, with GDP rising 5.3 percent -- surpassing expectations -- while employment remained stable, foreign trade volumes reached record highs, and stronger investor confidence pushed stock market indices upward.

Alongside this stability, dynamic momentum was evident. Output from high-tech industries surged 9.5 percent, while final consumption contributed 52 percent to economic growth. Significant increases in freight volumes, passenger flows and money supply vividly depicted a "flowing China" in action.

"These gains came despite severe external turbulence, underscoring the economy's stronger shock absorbers and its vitality," said Huang Hanquan, head of the Chinese Academy of Macroeconomic Research.

Over the past four-plus years, China has steered its economy through a storm of unilateralism, protectionism and geopolitical shocks. It has maintained a remarkably steady growth, stoked domestic demand, defused risks in areas like property and debt, while surmounting significant challenges in the technology sector.

China's economy expanded at an average annual growth rate of 5.5 percent from 2021 to 2024, with consumption contributing more to GDP growth than the 13th Five-Year Plan period, amid other changes that made the economy more sustainable and balanced.

Breakthroughs in domestically developed high-performance chips and operating systems have substantially reduced years of foreign dependence. The country has also become the first to amass more than 4 million valid domestic invention patents, cementing its position at the forefront of global innovation.

Building on achievements over the past four-plus years, China's top leadership laid out policy priorities for the coming months to bring the 14th Five-Year Plan to a successful conclusion at a high-level meeting last week. Boosting innovation and domestic demand remains high on the agenda.

Provinces are now unlocking new-quality productive forces at full throttle to power the next wave of growth. Henan is forging world-class clusters in ultra-hard materials and agricultural machinery; Anhui is blazing trails in electric vehicles and quantum technology; Hainan is establishing itself in modern seed breeding and commercial space ventures.

"China holds distinctive advantages in the new wave of global high-tech competition, with artificial intelligence at its forefront," said Luara Wang, chief China equity strategist for Morgan Stanley.

To bolster domestic consumption, a slew of targeted measures have been implemented. In June, the People's Bank of China launched a dedicated 500-billion-yuan ($70 billion) relending facility aimed at stimulating service consumption and the elderly care sectors.

In addition, fiscal support has been increased for consumer goods trade-in programs and initiatives that enhance people's well-being, including nationwide childcare subsidies, all aimed at empowering consumers.

Meanwhile, local governments are adding their own spice. Beijing is issuing 10 million yuan in cinema vouchers, Guangxi is hosting late-night food festivals, and provinces from Shanxi to Sichuan are turning intangible-heritage crafts into "trendy national brands" to invigorate consumer activity.

Concurrently, China is accelerating reforms and expanding high-standard opening up. Reforms in key sectors, such as building a unified national market, are helping resources move more freely across the country, improving their allocation, and fueling the next phase of growth from within.

Recent milestones in financial opening up include granting permission to Qualified Foreign Institutional Investors (QFIIs) to trade ETF options and allowing selected national-level economic development zones to establish overseas offices to attract investors.

These steps, alongside China's continuous hosting of landmark expos such as China International Supply Chain Expo, reaffirm the country's commitment to "opening wider to the outside world" and cultivating a world-class, market-oriented, law-based and internationalized business environment.

Despite profound and complex changes alongside rising uncertainties facing the country's development, China has inherent strengths to tackle them, including the advantages of socialism with Chinese characteristics, an enormous market, a complete industrial system, and abundant talent resources.

For the second half of the year, China's top leadership called for maintaining "continuity and stability" in macroeconomic policies while incorporating greater "flexibility and foresight."

"This approach gives market participants stable policy and market expectations while keeping policy tools in reserve, ready for China to hit the accelerator if needed," said Zou Yunhan, a researcher with the State Information Center.

The overarching goal is to conclude 2025 on a solid footing and smoothly transition into the next five-year cycle. Such stability will inject much-needed certainty into a volatile global economy, observers noted.