The official manufacturing PMI released in May came in higher than expected, signaling a recovery in the economy's upward momentum. It’s clear that since April, the State Council executive meetings have increasingly emphasized a “micro-stimulus†approach, focusing on targeted and effective policy measures. This shift reflects a more active and deliberate strategy to support economic growth while maintaining stability.
At a recent press conference held by the State New Office, Chen Dongqi, vice president of the National Development and Reform Commission’s Macroeconomic Research Institute, highlighted that the government’s various micro-stimulus initiatives this year have helped ensure that fiscal and monetary policies are operating actively and steadily. The market has interpreted this as the first official acknowledgment of the existence of such a policy, which is seen as both reasonable and necessary.
A report from Gao Hua Securities, based on insights from Daily Economic News reporters, noted that earlier challenges—such as weak consumer demand, sluggish external trade, and the lingering effects of tighter financial policies from last year—have largely subsided. The government’s direct policy support has been relatively modest but highly targeted, reflecting a focus on efficiency rather than broad-scale stimulus.
Since April, Premier Li Keqiang has chaired eight State Council executive meetings, emphasizing steady growth as a central theme. These meetings have consistently focused on maintaining economic stability within a “reasonable range.†At the first meeting in early April, Li made it clear that ensuring stable growth is the foundation of all policy efforts. Measures included expanding tax incentives for small and micro enterprises, accelerating shantytown redevelopment, and reforming railway investment systems.
Subsequent meetings continued to reinforce the importance of stable growth. On April 16, Li stressed the need to prioritize growth, while also advancing rural finance and employment-supporting tax policies. Many economists believe that the focus on GDP growth is closely tied to maintaining employment stability. With China’s current economic structure, a 7.4% growth rate is considered sufficient to meet annual employment targets.
By mid-April, the focus of the measures had become clearer. Li emphasized the role of investment in driving growth and promoting structural reforms. The meetings also supported enterprise autonomy in investment and encouraged social capital participation in infrastructure projects. Later meetings addressed export stability, the development of productive services, and major water conservation projects.
The term “micro-stimulus†has gained attention as a way to balance growth with long-term reform. After the Third Plenary Session of the 18th Central Committee, China’s economic strategy has shifted toward reform, though this transition comes with short-term challenges. Liu Shijin, deputy director of the National Research Center, noted that the economy is still transitioning from high-speed to medium-speed growth, and finding the right balance between growth and reform is critical.
This was reflected in the May 14 meeting, which called for greater reliance on market mechanisms and innovation-driven development. The National Development and Reform Commission also mentioned that macroeconomic regulation needs to evolve, focusing on supply-side adjustments like urbanization and regional restructuring.
On the demand side, officials emphasized avoiding one-off stimulus measures. For example, investing in railways in central and western regions could create long-term regional balance, while improving public services and medical insurance can boost consumer confidence without direct subsidies.
Recent data shows signs of recovery. In May, the manufacturing PMI hit a yearly high, and the non-manufacturing activity index rose to 55.5%, indicating stronger business operations. The Yiwu Small Commodity Index also showed improvement, suggesting growing domestic and foreign demand.
Despite these positive signs, challenges remain, especially in corporate financing. The May 30 executive meeting proposed deepening financial reforms to better support the real economy. Analysts note that the micro-stimulus approach has become more coherent, shifting from initial support to addressing real-economy funding issues.
Financial reforms and improved fiscal spending have also contributed to economic stability. The Ministry of Finance urged faster budget execution to meet annual goals, and CICC analysts believe proactive fiscal policy will help sustain growth in the second half of the year.
While some analysts believe the next quarter may face increased pressure due to base effects, the government is likely to continue its forward-looking policy approach, managing expectations and providing timely support to maintain economic stability.
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