An Outlook for the July Politburo Meeting
As the end of July approaches, one thing is sure to come. No, it’s not summertime at Beidaihe, at least not the one I remember. My memory of that place remains frozen in 2006, when I accompanied a family member to a resort run by the General Office of the CPC Central Committee, right where Mike Wallace’s famous interview once took place. Perhaps it’s the filter of childhood nostalgia, but the sea there has always been yellow to me. My overall impression of the place is just basic and modest. The staff raised chickens, ducks, and rabbits. I might consider writing one about it if I get a chance.
But that is a story for another day. Today I’m talking about the upcoming Politburo meeting. By convention, the Politburo convenes in late July to evaluate the economy and set the agenda for the second half of the year. Of the Politburo’s regular meetings, the April, July, and December sessions are the ones that typically centre on the economy, and the July meeting, falling at the year’s midpoint, has long been the best window into where macro policy is headed in H2.
Two things make the meeting important. First, 2026 is the opening year of the 15th Five-Year Plan, so the mid-year tone-setting will be about not just this year’s growth target but also how the entire five-year plan gets off the ground. Second, the economy is pulling apart. In the first half, new growth drivers such as high-end manufacturing, the digital economy, and modern services accounted for over 40% of growth, with value-added in high-tech manufacturing up 13.3%. Meanwhile, retail sales grew just 1.3% year-on-year and fixed-asset investment fell 5.7%.
That means policymakers must give the new drivers room to grow without resorting to the kind of indiscriminate, flood-like stimulus that would derail the structural transition they want, while also not standing by as the old economy drags the overall GDP number down.
This is why the July Politburo meeting will be a window for reading second-half policy. And its content is not unpredictable; some direction can already be seen from the Premier’s economic symposium and from statements at official press conferences.
In short, I do not expect a large short-term stimulus package at the end of the month, but there may be structural policies on fiscal support, employment, and services consumption.
1. The official read on the economy remains positive
To judge how strong policy will be, first look at how policymakers define the current situation. Judging from recent statements, the leadership’s view of overall growth and the full-year target remains upbeat, and their attention regarding Q2 leans more toward cultivating new growth drivers (培育新动能), which is basically tech sector growth and industrial upgrading. At the economic symposium on July 13, Premier Li Qiang’s judgment was
We must grasp the economic situation as a whole, and in particular see that China’s economy is fully shifting onto a track of high-quality development, and that the underlying support for long-term improvement is more solid.
要注重从整体上把握经济形势，特别是要看到我国经济正全面转入高质量发展轨道，长期向好的内在支撑更加坚实。
He also stressed “maintaining strategic resolve on high-quality development” (保持高质量发展战略定力). From this wording, I see no trace of a large short-term stimulus.
Similarly, at the press conference on first-half data, the National Bureau of Statistics used four characters to describe the economy: 稳 (stable), 韧 (resilient), 新 (new), 优 (improving). “稳” refers to GDP growth staying within the 4.5%–5% range. “韧” is language often seen in last year’s Politburo statements during the US-China trade war, stressing resilience against external shocks. “新” refers to emerging industries, represented by AI and electric vehicles. “优” refers to the share of manufacturing and the growth of corporate profits. Responding to the 4.7% first-half GDP growth, the NBS said
For an economy of China’s enormous scale, 4.7% growth is hard-won. Growth did slow in the second quarter, but the fundamentals — steady operation, and a shift toward the new and the better — remain unchanged.
对于我国这样超大规模的经济体，实现4.7%的增长难能可贵。尽管二季度增速有所回落，但是经济稳定运行、向新向优的基本面并没有变化。
As for the 4.3% growth in Q2, the statistics authorities prefer to attribute it to certain industries being affected by short-term and external factors, while stressing that monthly trends still show positive signs. This explanation means policymakers, for now, do not see the Q2 slowdown as a trend decline, so the perceived need to launch a large stimulus immediately is limited. Overall, although many academics and advisers believe the economy is cooling and have raised the problem of divergence across sectors (I recommend Li Daokui’s article, translated by Yuzhe He, and Liu Shijin’s article, which I introduced last week), from policymakers’ perspective, positive factors still dominate.
2. The trade-in policy (以旧换新) is hitting diminishing returns
Until now, the main policy tool for boosting consumption has been goods consumption, centered on the trade-in policy (以旧换新). But this policy faces diminishing marginal returns. In raw terms, sales of trade-in-related goods exceeded 2.6 trillion yuan in 2025, adding more than 1 percentage point to retail sales growth.
However, Li Xunlei, an economist and policy advisor, pointed out in a related study that the boost was strong in the policy’s first year but weakened in the second, likely because consumers who had already replaced their durable goods would not replace them again soon. For high-priced items like cars, subsidy recipients may also largely overlap with people who already planned to buy, meaning part of the subsidy covered existing demand rather than creating new consumption.
As a result, this year’s pro-consumption policy is gradually shifting from durable-goods subsidies and goods consumption toward services consumption and toward a focus on the supply side.
Premier’s symposium remarks reaffirmed that from another angle,
Implement well the policies for expanding and upgrading the services sector, enlarge the supply of quality services, and speed up the cultivation of new growth points in consumption.
抓好服务业扩能提质政策落实，扩大优质服务供给，加快培育消费新增长点。
3. New language from the PBoC, but no easing signal
What I find worth noting is that the central bank’s Q2 regular meeting, when analysing domestic and international conditions, mentioned two kinds of divergence: “divergence in the performance of major economies” (主要经济体经济表现分化) and “structural divergence” (结构分化). The PBoC didn’t specify what it meant by the latter. The most likely reading is a K-shaped split between emerging tech and traditional industry, as well as production versus demand.
Judging from the policy advice circulating among government advisers, and from documents like the 15th Five-Year Plan for the Employment-First Strategy (实施就业优先战略”十五五”规划), Beijing’s concern currently centres on job displacement. The government’s response, at this stage, centres on assessment, retraining for job transitions, and the development of new occupations, rather than legislating to slow the displacement itself. Given US-China competition in AI and the leadership’s recent emphasis on tech breakthroughs in the new industrial revolution, I don’t see China pulling back on AI investment or passing laws to halt automation. So if the July Politburo does take up structural divergence, short-term policy will more likely land on stabilising employment and vocational training.
Monetary policy keeps the earlier “moderately loose” (适度宽松) framing and continues to stress counter-cyclical and cross-cyclical adjustment, but there was no new language clearly signalling another round of RRR cuts or interest rate cuts (降准降息).
Some other things
Just as I finished writing this piece, the Ministry of Finance released the fiscal data for the first half of the year. There are two interesting numbers worth paying attention to.
The first is stamp duty on securities trading: 154.9 billion yuan, up 97.3% year-on-year. Since this tax is levied solely on stock turnover, a near-doubling means trading activity in H1 roughly doubled as well, a clear sign that households’ risk appetite (mine included) has warmed up considerably.
The second is revenue from the sale of state land-use rights, 977.8 billion yuan, down 31.5% year-on-year. That’s less than one trillion for the half-year, for a revenue stream that, at its peak, brought in 8.7 trillion yuan annually. The tightening of local governments’ purse strings shows up on the spending side too: expenditure under government-managed funds fell 16.4% year-on-year. Special-purpose bonds and special treasury bonds have plugged part of the gap, but the contraction in local government investment is unmistakable.
For policy, the widening decline in land sales arguably leaves room for the Politburo to strengthen its language on property. That said, I’ve also heard an interesting counter-reading, which is the retreat of land finance (土地财政) may not necessarily be in need of rescue, but actually a catalyst for the next round of China’s fiscal transformation; they believe it’s a shift from locally driven land finance to centrally driven equity finance (股权财政). And since land revenue sits in local hands while the capital market answers to Beijing, this switch would also mean a reshuffling of fiscal power between the centre and the localities.