As 2025 draws to a close, China's economy has navigated another year of significant challenges, both domestically and internationally. Despite the difficulties, tangible progress has been made. The Central Economic Work Conference held this week prioritized "expanding domestic demand and building a robust domestic market" as the first of eight key tasks for the coming year. The focus now shifts to how China will advance its economic agenda in 2026 and ensure that new policies effectively reach businesses and individuals.
**Domestic Transformation Takes Center Stage** At Qingdao Port in Shandong, the world's fourth-largest port, annual cargo throughput surpassed 700 million tons this week—15 days earlier than in 2024. Meanwhile, customs data revealed China's foreign trade performance for the first 11 months of 2025: total imports and exports reached 41.21 trillion yuan ($5.8 trillion), up 3.6% year-on-year. Exports accounted for 24.46 trillion yuan, while imports stood at 16.75 trillion yuan, with a record trade surplus exceeding $1 trillion.
Zhang Monan, a researcher at the China Center for International Economic Exchanges (CCIEE), noted that the data defied earlier expectations of a sharp export decline. "China’s trade surplus hitting $1 trillion underscores its irreplaceable role in global supply chains," she said.
Despite a 18.9% drop in exports to the U.S., growth in shipments to ASEAN (up $72.4 billion) and the EU (up $38.4 billion) offset the decline. Emerging markets in Africa and Latin America also contributed to the resilience.
**Private Enterprises Drive Export Resilience** Private firms emerged as the backbone of trade stability, with their imports and exports growing 7.1% to 23.52 trillion yuan—57.1% of China’s total trade. These companies accounted for nearly 80% of high-end machine tools, over 70% of lithium batteries, and 60% of medical device exports. "Their agility and innovation make them the primary engine of trade growth," Zhang Monan emphasized.
However, imports grew only 0.2%, reflecting weak domestic demand. "This imbalance highlights the urgency of expanding domestic consumption," she added.
**Reorienting Toward Domestic Demand** The Central Economic Work Conference stressed the need to "prioritize domestic circulation" amid global uncertainties. Zhang Xiaojing, director of the National Finance and Development Laboratory at CASS, argued that reducing reliance on trade surpluses is critical. "A surplus increases external dependence and vulnerability," he said.
With rising protectionism globally—including tariff and non-tariff barriers in emerging economies—China must diversify markets and strengthen its domestic market to mitigate external pressures.
**From Overproduction to Quality Supply** A key challenge is the mismatch between strong supply and weak demand, leading to cutthroat competition and consumer frustration. Policies this year targeted "anti-involution" measures in industries like automotive, solar, and food delivery. The State Administration for Market Regulation issued guidelines to curb price wars, while the conference pledged stricter enforcement against "destructive competition."
To rebalance supply and demand, the government aims to shift corporate focus from quantity to quality. Plans include expanding premium goods and services, with a 2027 target of creating three trillion-yuan consumer sectors and ten billion-yuan hotspots.
**Boosting Consumer Confidence Through Income Growth** The conference unveiled a landmark "urban-rural income growth plan," upgrading earlier efforts to raise incomes for low- and middle-income groups. Experts hailed the move as systemic, emphasizing its potential to unlock spending power.
"Higher incomes are the foundation of consumption," Zhang Xiaojing said, calling for wealth redistribution via fiscal policies. Rural residents should receive particular support to bridge urban-rural disparities.
Social safety nets, including pensions and healthcare, are also critical. Investment in public services yields a higher multiplier effect (3x in cities, 5x in rural areas) than traditional infrastructure, noted Dong Yu of Tsinghua University.
**Stabilizing Real Estate to Shore Up Wealth** The conference backed measures to absorb excess housing inventory, including converting unsold homes into affordable housing. "This direct intervention will stabilize asset values and consumer confidence," Zhang Xiaojing said.
**Looking Ahead: Quality and Efficiency** The 2026 economic agenda emphasizes "steady progress, quality, and efficiency." For local governments, this means fiscal health; for businesses, profitability beyond price wars; and for households, sustained income growth. As China pivots inward, the focus is clear: empower consumers to spend—and spend confidently.
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