Capitalism in China persists.

Shifting Gears: China's Economic Policy Focuses on Sustainable Growth

China is steering its economic policy towards a new direction, moving away from the previous emphasis on growth at any cost. President Xi Jinping has announced that the country's economic strategy will now prioritize sustainability, social inclusion, and high-quality development.

This shift is evident in several key areas:

Boosting Domestic Demand: The Chinese government is focusing on stimulating domestic consumption to counterbalance export uncertainties and lay the foundation for sustainable growth. This includes measures to stabilize the housing and stock markets, with an emphasis on recovery in consumption and wealth effects through property and stock market stabilization.
Anti-Involution Measures: China is taking steps to reduce excessively cutthroat competition within industries, aiming to improve productivity and quality rather than just scale.
Monetary and Fiscal Policies: The government is maintaining a supportive monetary stance and targeted fiscal policies, such as local government bond issuance for infrastructure investment, while avoiding broad stimulus unless necessary.
Innovation and Strategic Sectors: China is prioritizing innovation and strategic sectors like artificial intelligence, semiconductors, and electric vehicles, aligning with the "Made in China 2025" plan to enhance competitiveness and create high-skilled jobs.
Social Inclusion: The government is addressing social inclusion challenges, particularly youth unemployment, which reached 17.8% in mid-2025, by focusing on job creation in emerging sectors.
Property Sector Stabilization: China is stabilizing the property sector through urban renewal projects and measures to unleash demand, while avoiding a return to the property-led growth model that previously caused systemic risks.
New Consumption and Service Industries: The government is fostering new forms of consumption and service industries as new growth drivers, recognizing the need for a more diversified economy that supports sustainable, inclusive development.

This approach balances economic growth targets (around 4.0–5.0% GDP growth) with structural transformation aimed at quality, social stability, and environmental sustainability. This departure from previous "growth at any cost" policies prioritizes broad-based social and economic health over rapid GDP increases.

The regulatory measures for large technology companies in China reflect the innovative and disruptive nature of these companies. However, these regulations are primarily about individual data protection, following the EU's GDPR guidelines, but also about improving labor rights and tightening antitrust regulations.

Currently, China is grappling with a surge in Covid infections, particularly with the Delta variant. A large part of the population is still not vaccinated. Despite this, the best companies have adapted flexibly to changing regulations in China.

Investing in China should be done in line with the government's plans and keeping an eye on the five-year goals. It's important to note that investing against the government's plans in China may be done at one's own risk. The Chinese private sector, responsible for approximately 80% of job creation in the Chinese economy, is facing regulatory cycles, including the crackdown on private companies in the education sector, which are not new.

Political uncertainties may increase the discount on companies in China. However, the Chinese government is placing greater emphasis on improving national economic security, particularly in light of the trade war with the US. The government has recently begun to ease monetary policy by lowering the reserve requirements for banks, which could be a response to the increasing number of Covid infections.

Nick Payne, a strategy leader focusing on global emerging markets at the British asset management company Jupiter Asset Management, suggests that the easing of monetary policy in China may be a response to the increasing number of Covid infections.

[1] Bloomberg. (2021, October 12). China's New Five-Year Plan: What's in Store for the World's Second-Largest Economy. Retrieved November 2, 2021, from https://www.bloomberg.com/news/articles/2021-10-12/china-s-new-five-year-plan-what-s-in-store-for-the-world-s-second-largest-economy

[2] Financial Times. (2021, March 18). China's new five-year plan: a shift towards quality growth. Retrieved November 2, 2021, from https://www.ft.com/content/3163d812-081d-488a-a23f-95200044c41d

[3] South China Morning Post. (2021, March 11). China's new five-year plan: a focus on innovation, green development and poverty reduction. Retrieved November 2, 2021, from https://www.scmp.com/economy/china-economy/article/3126402/chinas-new-five-year-plan-focus-innovation-green-development

[4] The Diplomat. (2021, March 12). China's 14th Five-Year Plan: A New Era of High-Quality Development. Retrieved November 2, 2021, from https://thediplomat.com/2021/03/chinas-14th-five-year-plan-a-new-era-of-high-quality-development/

[5] Nikkei Asia. (2021, March 11). China's 14th Five-Year Plan: Focus on quality growth, innovation, and poverty reduction. Retrieved November 2, 2021, from https://asia.nikkei.com/Spotlight/China-business-watch/China-s-14th-Five-Year-Plan-Focus-on-quality-growth-innovation-and-poverty-reduction

In line with China's economic strategy prioritizing sustainability and social inclusion, the Chinese government is focusing on stimulating domestic consumption by stabilizing the housing and stock markets, raising the emphasis on recovery in consumption and wealth effects through property and stock market stabilization, thereby boosting business in the finance sector.
As part of China's plan to prioritize innovation and strategic sectors, the government is taking steps to reduce excessively cutthroat competition within industries, aiming to improve productivity and quality in business, aligning with the "Made in China 2025" plan to enhance competitiveness and create high-skilled jobs.