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Today we are going to talk about the core policy baton from the central government to the local governments in the new year, and how this baton is launched layer by layer. This lecture combines the interpretation of the latest policies with timeliness and instrumentality.
From the central government to the local governments: How is the policy baton transmitted layer by layer?
Many people have always had a misunderstanding that the launch of central policies from top to bottom is very simple, as if with a wave of the hand, the local governments will implement it properly. Of course not. There is a complex system for the implementation of Chinese policies. It happens that now is the intensive release period of cross-year policies. Let’s take these policies as an example to sort out the core focus and direction of the 2025 policies, and how they are implemented.
Generally speaking, cross-year policies need to be promoted at three levels:
According to convention, in December of the previous year, the Central Political Bureau meeting and the Central Economic Work Conference are held to set the tone; then from December to early January of the following year, each central ministry and commission holds its own national work conference to make arrangements within the system. During this period, the provincial, municipal and autonomous region party committees will also hold their own economic work conferences; then in mid-to-late January, the provincial, municipal and county levels hold local “two sessions” to give specific development plans.
In general, the central level sets the tone, the ministry level deepens the national measures in their respective fields, and the local level implements them in accordance with local realities. In this top-down process, there is support and pressure from vertical business departments, as well as cooperation and game between horizontal functional departments. The ideas of all levels and departments are mixed together, and finally form a policy that is layered, complex and obscure in the eyes of ordinary people.
Therefore, if you want to understand the policy, you need to be more careful to distinguish which things are really to be done and given priority, and which things are put on the back row or even said not to be done. Next, I will take you to gradually dismantle the whole process of the transmission and launch of the cross-year policy from the central government to the ministries and commissions, and then to the local governments.
The central government sets the tone
Let’s look at the central level first.
The Central Political Bureau meeting and the Central Economic Work Conference in December 2024 made a major shift in a series of tones, involving fiscal and monetary, specific matters and domestic assets:
In terms of fiscal and monetary aspects: it is clearly proposed to increase the deficit rate, issue special government bonds and other measures. In simple terms, the state borrows money and then implements a more active fiscal policy, which means spending more money; the general tone of monetary policy has shifted from a prudent monetary policy to a “moderately loose monetary policy”. My simple and rough understanding is that it is to prepare for a large amount of money. The last time such a change was in 2008 when responding to the financial crisis.
In terms of specific matters: it is rare to put domestic demand and consumption first among all matters, surpassing the priority of science and technology. You know, science and technology have always been ranked first before. Moreover, among the nine major tasks deployed by the central government, three of the first four are related to domestic demand and consumption, and it is necessary to “expand domestic demand in all directions.” Based on this analysis, I believe that consumption is the most urgent issue in 2025. The various ways of spending and printing money are also to make the money flow to everyone so that they can spend more.
Domestic assets: Both meetings clearly put forward the statement of “stabilizing the property market and the stock market”, and vigorously promote the real estate market to stop falling and stabilize, stabilize the property market and the stock market, stabilize expectations and stimulate vitality. It is rare to directly mention the issue of stock and property price stability in such a high-level meeting. Because the property market and the stock market are essentially the “wealth effect” of assets, everyone feels that their assets have increased in value and they have money, so they dare to spend money. So the above three things, fiscal and monetary, domestic demand and consumption, and domestic assets, are actually one thing behind them.
Based on the above aspects, I think the tone set by the central government for 2025 is: enough easing, raising domestic demand, and stabilizing assets.
Ministries and commissions deploy specific tasks
After the central level has set the tone, the ministries and commissions will begin to deploy specific tasks in their respective fields. From late December 2024 to early January 2025, more than 10 central ministries and commissions have held national work conferences. Next, I will summarize and refine the key statements of six departments including the State-owned Assets Supervision and Administration Commission of the State Council and the Ministry of Finance.
Let’s talk about the State-owned Assets Supervision and Administration Commission of the State Council first. There are 3 key statements.
First, establish a scientific market value management concept to better maintain the stability of the capital market. This means that central enterprises should take the lead in not letting stocks fall all the time and stabilize the stock market; second, continue to do a good job in clearing up the “two arrears”. That is, central enterprises should take the lead in repaying debts owed to suppliers of small and medium-sized enterprises. Only after the money is paid back can everyone expand and consume; third, central enterprises should increase their efforts to promote strategic restructuring and professional integration. To promote strategic restructuring, the focus is to do big things for national strategic restructuring; to promote professional integration, it is to improve the market competitiveness of central enterprises. But no matter which one, in short, it will continue to change in the next year.
Then let’s talk about the Ministry of Finance, which also has 3 key statements.
First, expand domestic demand and increase support for the replacement of old consumer goods with new ones. First, it is to give subsidies to the people to attract everyone to consume; second, to support the construction of major strategic and major security industries. It is to invest in related industries; third, to increase the deficit ratio, issue larger-scale government bonds, and increase transfer payments to local governments. Simply put, it is to borrow money and then give it to local governments to ease local fiscal pressure and provide basic local guarantees, such as wages, which should generally be maintained.
Then there is the Ministry of Housing and Urban-Rural Development.
First, promote the monetary resettlement of 1 million shantytown renovations; second, vigorously promote the sale of existing houses; third, plan and implement a number of urban renewal and transformation projects. It is worth noting that this time the Ministry of Housing and Urban-Rural Development did not mention the relevant matters of “local commercial housing storage”, which I think indicates that this matter is likely to be slowed down.
Then let’s talk about the Ministry of Industry and Information Technology.
First, make every effort to promote the steady growth of the industrial economy; second, build an independent and controllable industrial chain and supply chain; third, promote scientific and technological innovation and industrial innovation, and strengthen the transformation and upgrading of traditional industries.
Next is the Ministry of Civil Affairs.
First, formulate a method for identifying low-income people; second, improve the “one old and one young” system for elderly care and childcare. The main thing is to provide targeted assistance to low-income people, solve the problems of elderly care and childcare, and maintain the bottom line of security.
Finally, the China Securities Regulatory Commission.
First, strengthen the strategic force reserve and the construction of a market stabilization mechanism; second, investment and financing reform. Simply put, the stock market is still in great difficulty. In the new year, more national team forces must be formed to prevent asset prices from collapsing. And the financing market must also shift to an investment market, that is, the stock market must gradually shift from a model that focuses on financing functions to a more balanced model that focuses on investor returns.
In general, the deployment of major ministries and commissions is relatively detailed. Ministries and commissions in functional fields emphasize the implementation of specific tasks, such as the three major tasks proposed by the Ministry of Housing and Urban-Rural Development; while ministries and commissions in functional fields emphasize “cooperation”, such as the Ministry of Civil Affairs to ensure the foundation and people’s livelihood and provide support for core goals.
Multiple games of local governments
Then, it is the local government level, which involves complex multiple games.
The first aspect is the game of priority of matters. In the order of priority of specific tasks, various local departments, such as the National Development and Reform Commission, Industry and Information Technology, Housing and Urban-Rural Development, Commerce, Environmental Protection, Civil Affairs, Education, etc., are prone to a lot of games due to their different responsibilities and interests.
The second aspect is the game of competing for resources. The local fiscal funds and policy resources are limited. In order to maximize the completion of their own tasks, various departments will play games around limited financial resources.
The third aspect is the game between governments at different levels. For example, if the municipal government needs to spend money to do things, but the fiscal money at this level is not enough, should the municipal government issue bonds to raise money or ask for transfer payments from the provincial government? The former will increase its own burden, and the latter will increase the burden on the superiors, which will also lead to games between superiors and subordinates.
Therefore, I would like to remind you to pay attention to the local “two sessions” held at the provincial, municipal and county levels in January, which is the best window to observe the final results of local government games. Because only when all matters are played out will they be finally announced at the local “two sessions”, and I will talk about this in detail later.
Each province sets work priorities at the “two sessions”
Finally, different provinces also have different work priorities. Currently, only some provinces have held the “two sessions”. I have summarized and refined them for you here.
Hebei Province: Grasp investment to promote consumption, build Xiong’an New Area, and integrate Hebei’s industries into the Beijing-Tianjin innovation system;
Heilongjiang Province: Promote consumption, industrial construction, and accelerate the development of modern large-scale agriculture;
Jilin Province: Expand domestic demand, industrial innovation, and build a strong agricultural province;
Fujian Province: Comprehensively accelerate scientific and technological innovation, industrial digital upgrading, and vigorously develop the service industry;
Zhejiang Province: Boost and expand consumption, major project construction, industrial innovation and digitalization;
Shanghai: Expand domestic demand, stabilize foreign demand, and cultivate strategic emerging industries;
Beijing: Economic system reform, relieve the capital’s functions, and expand domestic demand;
Guangdong: Guangdong-Hong Kong-Macao Greater Bay Area construction, hundreds of counties, thousands of towns and villages, and modern industrial systems;
Hainan: Free Trade Port construction, expand domestic demand, and new quality productivity.
There are some other provinces, I will not list them one by one here. Students from other provinces can come to the comment area to share the “Two Sessions” work priorities of your province, and we can communicate and exchange ideas together.
From the provincial situations I listed above, it can be seen that except for the northeastern provinces, which will focus on agricultural development and other aspects, most provinces will basically focus on consumption, domestic demand, major investment, and scientific and technological innovation in 2025, and consumption ranks first. Therefore, from the central government to the local governments, they have all started in unison.
Micro details to see the implementation situation
Of course, what I said above are all relatively macro policy levels. Next, I will give three micro details that can verify this layer-by-layer transmission effect to help you deepen your experience.
The first detail is the choice of the first place visited by the top leaders. At the beginning of 2025, Premier Li Qiang chose Shandong, a major economic province in the east, as his first stop for field research. The Premier’s focus during the research was basically around consumption and investment: for example, it is necessary to increase the domestic demand policies such as old-for-new to release consumption potential, and various policy measures should be deployed and implemented as soon as possible, and major economic provinces should take the lead.
The second detail is that local governments are encouraging leading cadres to take the lead in consumption. On January 6, a new year economic work conference in Chongqing required leading cadres to take the lead in consumption, buy new clothes, go to restaurants, and spend more money. You know, it is often only when a task is very important and urgent that the government shouts out the slogan of “leading cadres take the lead”, and people within the system, especially in small and medium-sized cities, are the largest stable income group in the local area and the actual middle class in the local area, so the economy of small cities is often called “civil servant economy”. This time, the local government called for leading cadres to take the lead in consumption, which also shows the importance and urgency of consumption.
The third detail is debt reduction and loosening. In November 2024, the National People’s Congress approved a quota of 10 trillion yuan for local governments to resolve debts, 2 trillion yuan per year. Then the local government issued all the 2 trillion yuan quota last year in about a month, so the local government now has a lot of funds in hand. In December 2024, the central government issued the “New Regulations on Special Bonds”, which loosened the restrictions on local governments and allowed them to invest special bond funds in areas such as people’s livelihood, education, and consumption. It should be noted that this was not possible before. Such an arrangement also reveals the direction of the policy.
To sum up, I think that in 2025, the policy will focus on consumption and domestic demand, and it is an indisputable fact that water must be released and flow down. What we have to do is to see where the water is placed, and then try to get closer, the closer the better.
