Politburo Pledges Proactive Fiscal and Moderate Monetary Easing to Accelerate Economic Transition

The Communist Party of China's Politburo held a meeting on July 30 to analyze the current economic situation and deploy H2 economic work. The meeting proposed accelerating the transformation of old and new growth drivers, implementing more proactive fiscal policy and moderately loose monetary policy, fully utilizing the effectiveness of existing policies, promptly planning and introducing pragmatic incremental policies, increasing counter-cyclical adjustment, expanding domestic demand, optimizing supply, ensuring and improving people's livelihoods, enhancing development momentum, and stimulating social vitality.

Q2 real GDP grew 4.3% year-on-year, down 0.7 percentage points from Q1; nominal GDP growth rose to 5.9%, up about 0.9 percentage points from Q1. The Q2 GDP deflator turned positive year-on-year, ending a 12-quarter negative stretch since Q2 2023. However, fixed asset investment declined and retail sales of consumer goods fluctuated. In the first half, national general public budget expenditure was RMB 14.33 trillion, up 1.5% year-on-year, with health expenditure up 10.8% and social security and employment expenditure up 7.6%.

The meeting stressed that macro policies should be strengthened and made more effective, accelerating fiscal spending and bond fund usage, vigorously advancing the construction of major national strategies and key projects (liangzhong) and the work on new infrastructure and new urbanization (liangxin), and securing the bottom line of the "three guarantees" (basic living, basic salary, and basic operation) at the grassroots level. It called for comprehensively using and timely adjusting monetary policy tools, and optimizing the implementation of fiscal and financial coordination to promote domestic demand policies. The meeting emphasized effectively expanding domestic demand, improving quality supply to meet different groups' consumption needs, tapping service consumption potential, and solidly advancing the planning and construction of the "six networks" (transport, energy, water, and others). Yang Te, deputy director of the National Economic Comprehensive Department of the National Development and Reform Commission, said that next steps will include promoting the early deployment of various types of government investment, coordinating the advancement of the "two major" construction, solidly pushing forward the 109 major projects proposed in the outline of the 15th Five-Year Plan, and coordinating the planning and construction of the "six networks" and five key area facilities. To continuously stimulate private investment vitality, the role of special funds for fiscal and financial coordination to promote domestic demand will be fully leveraged, the implementation of subsidy policies will be accelerated, the long-term mechanism for private enterprises to participate in major national projects will be improved, the special guarantee policy tool for private investment will be well utilized, and the expansion and efficiency improvement of infrastructure real estate investment trusts (REITs) will be promoted.

The meeting also mentioned accelerating the construction of a modern industrial system, strengthening long-term stable support for basic research, deeply implementing the "AI+" action, developing new forms of intelligent economy, improving the AI governance system, actively promoting breakthroughs in frontier technologies and the development of future industries, striving to build emerging pillar industries, and continuously promoting the transformation and upgrading of traditional industries. In the first half, Chinese exports measured in US dollars grew 17.6% year-on-year, higher than the 5.5% growth level in 2025.