Analysis: Xi tempers expectations on economic goals but could act ‘earlier’, more ‘decisively’ in 2025

SINGAPORE: On a recent visit to northwestern Lanzhou city, located along the banks of the Yellow River, a particular remark by Chinese President Xi Jinping to local officials caught the attention of overseas China watchers – and the comment wasn’t about ecological conservation.
“Strive to achieve the full-year economic and social development goals,” Mr Xi reportedly said, marking a slight departure from the firm command he made just months earlier.
Following China’s economic reform-focused Third Plenum meeting held in July, his message then was stronger and clearer – that targets must be achieved “unwaveringly”.
This shift in tone, however “subtle”, did not go unnoticed among observers. 
“Where normally we expect to see phrases such as ‘fully committed’ or ‘unwavering,’ (Mr Xi’s use of) the word ‘strive’ emphasises the effort and not the outcome,” wrote Mr John Browning, managing director of BANDS Financial, a Hong Kong-based commodity and financial futures broker, in his newsletter.
Others say it wasn’t just a change in rhetoric. While Beijing remains officially committed to its 5 per cent growth target for 2024, analysts who spoke to CNA said the different tune was a reflection of Mr Xi’s tacit acknowledgement of complex challenges now confronting China’s economy, and is trying to temper expectations. 
“Chinese officials are often very deliberate in their wording,” noted Mr Matteo Giovannini, a senior finance manager at the Industrial and Commercial Bank of China (ICBC) and non-resident associate fellow at the Center for China and Globalization, adding that the linguistic change could be “a sign that economic pressures in China are mounting, and that the leadership is managing expectations.”
Mr Xi’s shift from a “more resolute ‘unwaveringly’ to somewhat more cautious ‘strive to accomplish’ suggests a recognition (from him) of the difficulties in achieving China’s 2024 growth targets but not a full admission that the target is unattainable,” said Mr Giovannini.
He adds: “While the change in language seems subtle, in the context of Chinese political discourse, even slight variations in phrasing can signal broader intentions.”
Analysts told CNA it’s a possible indication that Beijing is re-evaluating its approach, which could pave the way for stronger policy interventions in the coming year.  
Although relatively uncommon, the expression has been used on various occasions over the years.
In February 2020, when the pandemic weighed heavily on the economy and China broke with more than a quarter-century tradition by not issuing an economic growth target for the year, Mr Xi urged officials to “strive to achieve the goals and tasks for economic and social development.” 
He repeated it in July 2022 after a quarterly Politburo economic meeting, telling officials to “strive to achieve the best results possible”. 
 
Last year he said it again during the central economic work conference in December: “Strive to achieve the various targets and tasks of economic and social development.”
Despite Mr Xi’s softer tone, some experts believe it might not represent a dramatic change in policy. 
Ms Guo Shan, partner at Hutong Research, told CNA that while China’s economic landscape has altered, top leaders seem to have already accepted the reality – that the growth target is unlikely to be met.
“This is likely due to the economy’s structural soundness, with auto sales improving, employment stabilising, and high-tech industries outperforming,” Ms Guo said. “The leadership appears more focused on addressing long-term structural issues (rather) than hitting an exact GDP figure.”
Last Saturday (Sep 14), China’s National Bureau of Statistics released its economic data for August, with most indicators falling short of expectations. 
Retail sales, industrial value added, and year-to-date fixed-asset investment (FAI) grew by 2.1 per cent, 4.5 per cent, and 3.4 per cent year-on-year, respectively – each lower than in July, even with recent policy support. 
“These figures leave China in a very difficult position to meet its annual growth target,” Ms Guo added. The country would “need at least 4 per cent nominal growth in both retail sales and FAI to reach the real GDP growth target of “around 5 per cent,” she said. 
Mr Dexter Tiff Roberts, a nonresident senior fellow at The Atlantic Council’s Global China Hub, echoed the sentiment, adding that Mr Xi’s choice of words in Lanzhou reflected broader, ongoing economic battles.
“Given how unremittingly bad China’s economy has been of late … I do think that Mr Xi’s change of phrase must be understood as important,” he told CNA. “At the very least, he is signalling to provincial authorities that reaching the growth targets set for the year will be a struggle.”
Already, the faltering Chinese economic activity prompted global brokerages to scale back their 2024 growth forecasts to below the government’s official target.
UBS lowered its forecast for China’s 2024 real GDP growth to 4.6 per cent from 4.9 per cent, Bank of America to 4.8 per cent from 5 per cent, and Nomura Securities is now looking at 4.5 per cent for 2024, and 4 per cent for 2025.
Reaching a 5 per cent growth no doubt will be difficult, experts say, but not impossible. 
“Provided the Chinese government increases investment and spending at the central level,” said Ms Su Yue, principal economist at The Economist Intelligence Unit (EIU).
Mr Xi’s more moderated words could also suggest that Beijing might now be reconsidering its growth strategies. 
Analysts noted some signs – a move away from the singular focus on short-term growth, replaced by a deeper, more measured approach – as well as prioritising long-term stability and structural reforms.
But it “may not be a bad thing if abandoning the growth target this year means avoiding unproductive government borrowing,” said Ms Su. 
In fact, it could be “a wise policy choice”, she adds. 
“What the Chinese government now needs to focus on is transferring wealth to households through mortgage rate cuts and tax reductions while also supporting the private sector, which accounts for a significant portion of hiring,” she said. 
Boosting domestic consumption, though, remains a critical focus for Beijing. Ms Guo from Hutong Research pointed to the government’s “trade-in campaign” as a notable effort. 
Its most targeted measure yet for boosting consumption, Chinese authorities announced in July that they would allocate 300 billion yuan (US$42.44 billion) in ultra-long special government bonds, to expand an existing trade-in and equipment upgrade policy rolled out in March.
According to China’s top economic planner – the National Development and Reform Commission – the plan involves trading-in of big-ticket consumer goods such as cars and home appliances, which represents a vast market exceeding 5 trillion yuan annually.
“The latest campaign is much more aggressive than earlier efforts, with doubled subsidies and immediate disbursement of funds,” Ms Guo said. “We expect data to improve in the coming months as local governments roll out these initiatives.”
But despite these efforts, Ms Su remains cautious about the outlook for consumption. The EIU forecasts China’s economy to grow by only 4.7 per cent this year, citing low private sector confidence and fiscal constraints at the local government level. 
“Weak expectations for future income will constrain consumption decisions, especially in a disinflationary environment,” she warned.
Another area worth noting in terms of government intervention is the central bank.
The People’s Bank of China purchased some 400 billion yuan worth of long-dated sovereign bonds on Aug 29, a move that revived speculation China is preparing to intervene in the domestic debt market, and possibly shore up bond yields.
“This is the largest increase in years and if not decades, and it’s green-lighted by the top leaders at the Third Plenum,” said Ms Guo.
“So we do expect the central government and the central government bonds to play a more important role in China’s fiscal system and entire macro policy environment in the years to come.”
But the question remains – whether China will be able to sustain growth beyond 5 per cent without addressing the deeper issues in the real estate sector, experts say, which has struggled to regain its footing after years of rapid expansion and the subsequent regulatory clampdown. 
Latest economic data showed that the sector had smaller declines across several key indicators. Investment fell by 10.2 per cent for the year through August, the same pace of decline as July. Despite some recent improvements, it remains a significant source of instability. 
Ms Guo believes that while the real estate market is still on track for a gradual recovery, the central government is unlikely to introduce new policies to support it in the near term. 
“The local government issued a lot more local government bonds in August, which can be used to purchase housing stock if needed,” she noted. “So the central government does not really need to intervene at this moment.”
“From our point of view, as long as developers have the money to complete their existing projects, Beijing is not interested in saving the real estate sector.”
This reluctance to provide further stimulus to the real estate sector is part of a broader strategy to avoid reinflating a property bubble, according to the Atlantic Council’s Mr Roberts.
“(China does) not want to loosen the spending spigots too much, if it means giving up on their goal of creating a more sustainable path driven by ‘new quality productive forces,’ as Mr Xi refers to it,” Mr Roberts explained.
Analysts say the Chinese government may be positioning itself for more aggressive measures in 2025 if growth targets continue to falter.
“The central government may act earlier and more decisively in 2025, possibly increasing fiscal spending or enacting further interest rate cuts,” said Ms Guo. “But if Beijing does not want to save its real estate sector, we probably cannot expect China to grow by more than 5 per cent next year.”
Others, like EIU’s Ms Su, say the Chinese government may need to rethink its strategy to achieve sustainable growth and should pause some of its “more disruptive policies” in favour of boosting consumer confidence. 
“The government will likely focus on welfare improvement measures to boost consumer confidence, with the central government transferring revenue to local governments to facilitate this,” Ms Su said. 
“We expect the lower-income groups might benefit from these policy moves, while the middle class could continue to struggle due to the lack of significant improvement in asset prices, which would limit consumption through the wealth effect.”
But for now, all hope is not lost. China “still has powerful policy levers”, said ICBC’s Matteo Giovannini, adding that fiscal and monetary tools could help spur growth. 
“While recent data hasn’t been particularly encouraging, there’s time left in the year and the government may use stimulus measures to bolster the economy, if necessary.”
Even as China navigates its economic challenges, environmental goals remain a cornerstone of its policy agenda, a priority reaffirmed during Mr Xi’s visit to Gansu province on Sep 12 where he made the earlier remarks. 
Lanzhou, Gansu’s capital city, sits on the edge of China’s “ecological redline,” a boundary that aims to protect environmentally sensitive areas from unchecked development.
A report published by China’s Xinhua state news agency stated that Mr Xi had called for breaking new ground in the ecological conservation and high-quality development of the Yellow River basin, while urging efforts to explore establishing a basin-wide, market-based and diversified compensation mechanism for ecological conservation.
The focus on ecological preservation in Gansu mirrors national initiatives like the “dual carbon” policy, which aims for peak carbon emissions by 2030 and carbon neutrality by 2060. These efforts are backed by policy shifts, such as the promotion of renewable energy, and the development of green industries. 
Ms Guo Shan said the balancing act between China’s economic development and environmental protection was becoming central to its growth model.
“(President Xi) wants everything, right? He wants both the economic targets, as well as the environmental targets. Neither one can be foregone. (By looking) at the five-year plan, the environmental targets actually carry a heavier weight than the economic goals.”
“But without economic development, you can’t really have the environment targets met either,” Ms Guo said. 
“At the same time … consider(ing) (how) renewable energy (in) the Western provinces (acts) as a key growth driver, this is where environmental protection and GDP growth align, and the leadership wants the Western Province, such as Gansu, to achieve them together.”