Central Economic Work Conference concludes; Five Musts and Eight Key Tasks; US-Japan-China; H200s
The Central Economic Work Conference concluded Thursday. I have posted a full translation of the readout here. There were no surprises as it mostly fleshed out what we saw from the Monday Politburo meeting readout, and no indications of more aggressive stimulus measures or a shift in the currency policy, but it is an important and interesting document. All members of the Politburo Standing Committee attended, Xi gave a speech and Li Qiang summed up the meeting.
The politics may be at least as interesting as the readout. Politburo member Ma Xingrui was not shown in the CCTV report of the meeting, which per protocol shows the Politburo members and other officials in attendance. Ma was also missing from the CCTV report of the November Politburo study session, so the rumors that he is under investigation look more likely to be correct. This X account also noted that Xu Xueqiang, head of the Equipment Development Department of the Central Military Commission (CMC), and Wang Renhua, Secretary of the Political and Legal Affairs Commission of the CMC, were absent. So the purges continue…
Here are some of the highlights:
The meeting noted that there are still many old problems and new challenges in China’s economic development. The impact of changes in the external environment is deepening, the contradiction of strong domestic supply and weak demand is prominent, and there are many risks and hidden dangers in key areas. Most of these are problems arising during development and transformation, and they can be solved through effort. The supporting conditions and the basic trend of China’s economy remaining positive in the long run have not changed. We must strengthen confidence, utilize our advantages, respond to challenges, and continuously consolidate and expand the trend of economic recovery and improvement.
会议指出，我国经济发展中老问题、新挑战仍然不少，外部环境变化影响加深，国内供强需弱矛盾突出，重点领域风险隐患较多。这些大多是发展中、转型中的问题，经过努力是可以解决的，我国经济长期向好的支撑条件和基本趋势没有改变。要坚定信心、用好优势、应对挑战，不断巩固拓展经济稳中向好势头。
The meeting emphasized that to do a good job in economic work next year, we must follow the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, deeply implement the spirit of the 20th CPC National Congress and the plenary sessions of the 20th Central Committee, and fully, accurately, and comprehensively implement the new development philosophy. We must accelerate the construction of a new development pattern, focus on promoting high-quality development, and adhere to the general principle of seeking progress while maintaining stability. We must better coordinate domestic economic work and international economic and trade struggles, better coordinate development and security, and implement more proactive and effective macro policies. We must enhance its foresight, precision, and coordination, continuously expand domestic demand and optimize supply, and improve the quality of new growth while revitalizing existing resources, and develop new quality productive forces according to local conditions. We must deepen the construction of a unified national market, continuously prevent and defuse risks in key areas, focus on stabilizing employment, enterprises, the market, and expectations, promote the effective improvement of economic quality and the reasonable growth of quantity, maintain social harmony and stability, and achieve a good start for the “15th Five-Year Plan.”..
会议强调，做好明年经济工作，要以习近平新时代中国特色社会主义思想为指导，深入贯彻党的二十大和二十届历次全会精神，完整准确全面贯彻新发展理念，加快构建新发展格局，着力推动高质量发展，坚持稳中求进工作总基调，更好统筹国内经济工作和国际经贸斗争，更好统筹发展和安全，实施更加积极有为的宏观政策，增强政策前瞻性针对性协同性，持续扩大内需、优化供给，做优增量、盘活存量，因地制宜发展新质生产力，纵深推进全国统一大市场建设，持续防范化解重点领域风险，着力稳就业、稳企业、稳市场、稳预期，推动经济实现质的有效提升和量的合理增长，保持社会和谐稳定，实现“十五五”良好开局。
The meeting pointed out that regarding the policy orientation for next year’s economic work, we must adhere to seeking progress while maintaining stability and promoting quality and efficiency. We must leverage the integrated effects of existing policies and incremental policies, increase the intensity of counter-cyclical and cross-cyclical adjustments, and improve the efficacy of macro-economic governance. We must continue to implement a more proactive fiscal policy. Maintain necessary fiscal deficit levels, total debt scale, and total expenditure, strengthen scientific fiscal management, optimize the structure of fiscal expenditure, and standardize tax incentives and fiscal subsidy policies. Attach importance to solving local fiscal difficulties and firmly hold the bottom line of the “three guarantees” at the grassroots level. Enforce strict financial and economic discipline, and insist that party and government organs get used to “tightening one’s belt 过紧日子”. We must continue to implement a moderately loose monetary policy. Take promoting stable economic growth and a reasonable recovery of prices as important considerations for monetary policy, flexibly and efficiently use various policy tools such as cutting the reserve requirement ratio (RRR) and interest rates to maintain sufficient liquidity, smooth the transmission mechanism of monetary policy, and guide financial institutions to increase support for key areas such as expanding domestic demand, technological innovation, and micro, small, and medium-sized enterprises. Keep the RMB exchange rate basically stable at a reasonable and balanced level. We must enhance the consistency and effectiveness of macro policy orientation. Include all types of economic and non-economic policies, as well as existing and incremental policies, into the macro policy orientation consistency assessment. Improve the expectation management mechanism to boost social confidence.
会议指出，明年经济工作在政策取向上，要坚持稳中求进、提质增效，发挥存量政策和增量政策集成效应，加大逆周期和跨周期调节力度，提升宏观经济治理效能。要继续实施更加积极的财政政策。保持必要的财政赤字、债务总规模和支出总量，加强财政科学管理，优化财政支出结构，规范税收优惠、财政补贴政策。重视解决地方财政困难，兜牢基层“三保”底线。严肃财经纪律，坚持党政机关过紧日子。要继续实施适度宽松的货币政策。把促进经济稳定增长、物价合理回升作为货币政策的重要考量，灵活高效运用降准降息等多种政策工具，保持流动性充裕，畅通货币政策传导机制，引导金融机构加力支持扩大内需、科技创新、中小微企业等重点领域。保持人民币汇率在合理均衡水平上的基本稳定。要增强宏观政策取向一致性和有效性。将各类经济政策和非经济政策、存量政策和增量政策纳入宏观政策取向一致性评估。健全预期管理机制，提振社会信心。
There are “five musts” for 2026”
We must fully tap into economic potential; we must adhere to both policy support and reform and innovation; we must ensure we can both “let go to vitalize” and “manage well”; we must insist on closely combining investment in physical assets with investment in human capital; and we must rely on practicing our “internal skills/internal energy 练内功” to cope with external challenges.
必须充分挖掘经济潜能，必须坚持政策支持和改革创新并举，必须做到既“放得活”又“管得好”，必须坚持投资于物和投资于人紧密结合，必须以苦练内功来应对外部挑战。
And “eight key tasks”:
First, persist in domestic demand as the driver and build a strong domestic market. Deeply implement actions to boost consumption and formulate and implement plans to increase the income of urban and rural residents. Expand the supply of high-quality goods and services. Optimize the implementation of the “Two New” policies (large-scale equipment renewals and trade-ins of consumer goods). Clear unreasonable restrictive measures in the consumption field and unleash the potential of service consumption. Promote the stabilization of investment, appropriately increase the scale of investment within the central budget, optimize the implementation of “Two Heavy” projects (major national strategies and security capabilities), optimize the management of local government special bond usage, continue to leverage new policy-based financial instruments, and effectively stimulate the vitality of private investment. Promote urban renewal with high quality.
一是坚持内需主导，建设强大国内市场。深入实施提振消费专项行动，制定实施城乡居民增收计划。扩大优质商品和服务供给。优化“两新”政策实施。清理消费领域不合理限制措施，释放服务消费潜力。推动投资止跌回稳，适当增加中央预算内投资规模，优化实施“两重”项目，优化地方政府专项债券用途管理，继续发挥新型政策性金融工具作用，有效激发民间投资活力。高质量推进城市更新。
Second, persist in innovation-driven development and accelerate the cultivation of new momentum. Formulate a plan for the integrated development of education, technology, and talent. Build international science and technology innovation centers in Beijing (Beijing-Tianjin-Hebei), Shanghai (Yangtze River Delta), and the Guangdong-Hong Kong-Macao Greater Bay Area. Reinforce the principal role of enterprises in innovation and improve the intellectual property protection system in emerging fields. Formulate an action plan for the expansion and quality improvement of the service sector. Implement a new round of actions for the high-quality development of key industrial chains. Deepen and expand “Artificial Intelligence +”, and improve AI governance. Innovate technology finance services.
二是坚持创新驱动，加紧培育壮大新动能。制定一体推进教育科技人才发展方案。建设北京（京津冀）、上海（长三角）、粤港澳大湾区国际科技创新中心。强化企业创新主体地位，完善新兴领域知识产权保护制度。制定服务业扩能提质行动方案。实施新一轮重点产业链高质量发展行动。深化拓展“人工智能+”，完善人工智能治理。创新科技金融服务。
Third, persist in overcoming reform challenges, enhancing the momentum and vitality of high-quality development. Formulate regulations for the construction of a unified national market and deeply rectify “involution-style” competition. Formulate and implement plans to further deepen the reform of state-owned assets and state-owned enterprises (SOEs), and improve supporting regulations and policies for the Private Economy Promotion Law. Accelerate the clearing of overdue payments to enterprises. Promote win-win development for platform enterprises, operators on platforms, and workers. Expand pilots for market-based allocation of factors. Improve the local tax system. Deeply promote the reduction and quality improvement of small and medium-sized financial institutions, and continuously deepen the comprehensive reform of investment and financing in the capital market.
三是坚持改革攻坚，增强高质量发展动力活力。制定全国统一大市场建设条例，深入整治“内卷式”竞争。制定和实施进一步深化国资国企改革方案，完善民营经济促进法配套法规政策。加紧清理拖欠企业账款。推动平台企业和平台内经营者、劳动者共赢发展。拓展要素市场化改革试点。健全地方税体系。深入推进中小金融机构减量提质，持续深化资本市场投融资综合改革。
Fourth, persist in opening up and promote win-win cooperation in multiple fields. Steadily promote institutional opening up, orderly expand independent opening up in the service sector, optimize the layout and scope of pilot free trade zones, and solidly promote the construction of the Hainan Free Trade Port. Promote the integrated development of trade and investment, and of domestic and foreign trade. Encourage and support service exports, and actively develop digital trade and green trade. Deepen the reform of the foreign investment promotion system and mechanism. Improve the overseas comprehensive service system. Promote the high-quality development of the Belt and Road Initiative. Promote the signing of more regional and bilateral trade and investment agreements.
四是坚持对外开放，推动多领域合作共赢。稳步推进制度型开放，有序扩大服务领域自主开放，优化自由贸易试验区布局范围，扎实推进海南自由贸易港建设。推进贸易投资一体化、内外贸一体化发展。鼓励支持服务出口，积极发展数字贸易、绿色贸易。深化外商投资促进体制机制改革。完善海外综合服务体系。推动共建“一带一路”高质量发展。推动商签更多区域和双边贸易投资协定。
Fifth, persist in coordinated development and promote urban-rural integration and regional linkage. Coordinate the promotion of urbanization with county towns as important carriers and the comprehensive revitalization of rural areas, promoting the high-quality development of the county economy. Strictly guard the red line of arable land, never relax the grip on grain production, and promote the maintenance of prices for grain and other important agricultural products at a reasonable level. Continuously consolidate and expand the achievements of poverty alleviation, incorporate normalized assistance into the overall implementation of the rural revitalization strategy, and firmly hold the bottom line of preventing large-scale return to poverty. Support economically strong provinces in “shouldering the heavy beams.” Strengthen the coordinated linkage of key city clusters and deepen cross-administrative regional cooperation. Strengthen the overall planning of major bays and promote the high-quality development of the marine economy.
五是坚持协调发展，促进城乡融合和区域联动。统筹推进以县城为重要载体的城镇化建设和乡村全面振兴，推动县域经济高质量发展。严守耕地红线，毫不放松抓好粮食生产，促进粮食等重要农产品价格保持在合理水平。持续巩固拓展脱贫攻坚成果，把常态化帮扶纳入乡村振兴战略统筹实施，守牢不发生规模性返贫致贫底线。支持经济大省挑大梁。加强重点城市群协调联动，深化跨行政区合作。加强主要海湾整体规划，推动海洋经济高质量发展。
Sixth, persist in the guidance of “Double Carbon” goals and promote comprehensive green transformation. Deeply promote energy-saving and carbon-reduction transformation in key industries. Formulate an outline for the construction of an energy powerhouse, accelerate the construction of a new energy system, and expand the application of green electricity. Strengthen the construction of the national carbon emission trading market. Implement comprehensive solid waste management actions, deeply fight the battles to defend blue skies, clear waters, and clean soil, and strengthen the governance of new pollutants. Solidly promote the “Three North” Shelterbelt Program battle, and implement the integration and optimization of nature reserves. Strengthen the construction of meteorological monitoring, forecasting, and early warning systems, accelerate the filling of shortcomings in flood control, drainage, and disaster resistance infrastructure in northern regions, and improve the ability to cope with extreme weather.
六是坚持“双碳”引领，推动全面绿色转型。深入推进重点行业节能降碳改造。制定能源强国建设规划纲要，加快新型能源体系建设，扩大绿电应用。加强全国碳排放权交易市场建设。实施固体废物综合治理行动，深入打好蓝天、碧水、净土保卫战，强化新污染物治理。扎实推进“三北”工程攻坚战，实施自然保护地整合优化。加强气象监测预报预警体系建设，加紧补齐北方地区防洪排涝抗灾基础设施短板，提高应对极端天气能力。
Seventh, persist in prioritizing people’s livelihood and strive to do more practical things for the masses. Implement actions to stabilize jobs, expand employment, and improve job quality; stabilize employment for key groups such as college graduates and migrant workers; and encourage and support flexible workers and those in new forms of employment to participate in employee insurance. Promote the adjustment of the layout and structure of educational resources, and increase the supply of general high school places and high-quality undergraduate enrollment. Optimize the centralized procurement of medicines and deepen the reform of medical insurance payment methods. Implement rehabilitation and nursing expansion and improvement projects, promote the long-term care insurance system, and strengthen care and assistance for groups in difficulty. Advocate a positive view of marriage and childbearing, and strive to stabilize the scale of the new birth population. Solidly do a good job in work safety, disaster prevention, mitigation and relief, and food and drug safety.
七是坚持民生为大，努力为人民群众多办实事。实施稳岗扩容提质行动，稳定高校毕业生、农民工等重点群体就业，鼓励支持灵活就业人员、新就业形态人员参加职工保险。推进教育资源布局结构调整，增加普通高中学位供给和优质高校本科招生。优化药品集中采购，深化医保支付方式改革。实施康复护理扩容提升工程，推行长期护理保险制度，加强对困难群体的关爱帮扶。倡导积极婚育观，努力稳定新出生人口规模。扎实做好安全生产、防灾减灾救灾、食品药品安全等工作。
Eighth, persist in holding the bottom line and actively and properly resolving risks in key areas. Focus on stabilizing the real estate market, implement city-specific policies to control increments, reduce inventory, and optimize supply, and encourage the acquisition of existing commercial housing mainly for use as affordable housing. Deepen the reform of the housing provident fund system and orderly promote the construction of “good houses.” Accelerate the construction of a new model of real estate development. Actively and orderly resolve local government debt risks, urge localities to take the initiative to resolve debts, and strictly prohibit the illegal addition of hidden debts. Optimize debt restructuring and replacement methods, and take multiple measures to resolve the operating debt risks of local government financing platforms.
八是坚持守牢底线，积极稳妥化解重点领域风险。着力稳定房地产市场，因城施策控增量、去库存、优供给，鼓励收购存量商品房重点用于保障性住房等。深化住房公积金制度改革，有序推动“好房子”建设。加快构建房地产发展新模式。积极有序化解地方政府债务风险，督促各地主动化债，不得违规新增隐性债务。优化债务重组和置换办法，多措并举化解地方政府融资平台经营性债务风险。
The leadership is going to push harder on baby-making given this language in the seventh key task - advocate a positive view of marriage and childbearing, and strive to stabilize the scale of the new birth population 倡导积极婚育观，努力稳定新出生人口规模.
Here is the readout of the 2024 CEWC if you want to compare the two.
And here is the front page of the December 12 People’s Daily:
Summary of today’s top items:
2. Japan-China - The US showed support for Japan with a joint exercise with US B-52 bombers and F-35 and F-15 Japanese jets. It may also have been a reaction to the joint Russia-China exercises, but the message should be reassuring to Tokyo and annoying to Beijing, and is far more meaningful than the speculation about what may or may not have been said in the Trump-Takaichi phone call. On Thursday evening Secretary of War Pete Hegseth had a call with Shinjirō Koizumi, Minister of Defense of Japan. Will China now find a way to an offramp from the crisis triggered by its reaction to the comments last month by the Japanese Prime Minister?
3. Wang Yi’s speech - Wang Yi gave a speech titled Upholding the Scientific Guidance of Xi Jinping Thought on Diplomacy to Continuously Create New Prospects for Major-Country Diplomacy with Chinese Characteristic on the “occasion of the publication and distribution of the Study Outline of Xi Jinping Thought on Diplomacy (2025 Edition)” I have translated it in full here. He had this to say about relations with the US, Russia and the Global South:
In the historical process of deepening and expanding the all-round diplomatic layout, China-U.S. relations are developing in the direction of mutual respect, peaceful coexistence, and win-win cooperation; China-Russia strategic coordination has become more mature, stable, and resilient; our country’s relations with neighbors have entered the best period in modern times; the Global South continues to take new steps in uniting for strength; we actively promote the reform and improvement of the global governance system and firmly safeguard national sovereignty, security, and development interests.
4. No change to US policy on Taiwan - A slight change in wording about Taiwan in the new US National Security Strategy led to speculation that the US was adjusting policy towards Taiwan, but a White House official told “Just the News” that “there is no change to U.S. policy regarding Taiwan”. To be fair, any change in US policy towards Taiwan is less likely to come in a strategy document and more likely to be announced in Truth Social post from President Trump.
5. US-China and other countries - The US, Singapore, Australia, Japan, South Korea and Israel will on Friday sign the “Pax Silica Declaration”, which Politico says is “intended to address deficits in critical mineral access edging out China’s massive investment in its critical minerals and tech sector”. Chinese officials will not be pleased, especially by this statement from Under Secretary of State for Economic Affairs Jacob Helberg:
By aligning our economic security approaches, we can start to have cohesion to basically block China’s Belt and Road Initiative — which is really designed to magnify its export-led model — by denying China the ability to buy ports, major highways, transportation and logistics corridors
PRC officials are already unhappy with Mexico after that country’s Senate approved a bill for increased tariffs that will hit PRC imports, with the Ministry of Commerce saying Thursday that “if implemented, the relevant measure would still substantially harm the interests of relevant trading partners, including China”.
6. H200s and China - Nvidia dismissed the Wednesday report from The Information that DeepSeek has smuggled in several thousand Blackwells to train its next-generation model, telling CNBC:
We haven’t seen any substantiation or received tips of ‘phantom data centers’ constructed to deceive us and our [original equipment manufacturer] partners, then deconstructed, smuggled and reconstructed somewhere else
On Thursday, US Commerce Secretary Lutnick told CNBC that the decision about the H200 approval for China came from conversations between President Trump and Nvidia CEO Jensen Huang, admitting that he was out of the loop on the decision, and reminding everyone how much the interagency process has broken down in the current administration.
The White House Press Secretary confirmed that those H200 chips destined for China “will only be sent to China after undergoing a security inspection here in the United States”. As I wrote yesterday, this is more likely a ruse charade to get around US law on export taxes to charge the 25% cut for the US government as a tariff on the imports of the chips from Taiwan, and then re-export them to China. There is no reason they would need a “security inspection”, but this is not a great idea for Nvidia as it could reinforce concerns of the more paranoid parts of the PRC system who may assume this is the step where the US inserts backdoors/tracking capabilities. The US government has not said which agency will conduct the “security inspection”, but if it is the NSA then China may end up buying fewer chips than Nvidia hopes.