China’s Fourth Plenum Shows Policy Continuity Amid Geopolitical Uncertainties

China’s just-wrapped Fourth Plenary Session of the 20th Central Committee brought few surprises. The release suggests continuity rather than change. All signals indicate that the Chinese government is broadly satisfied with its current growth strategy and intends to stay the course.In short, high-quality development still reigns supreme, reinforcing the existing focus on productivity and self-reliance in strategic sectors such as AI, biotech, and advanced manufacturing. While the Chinese government is aware of the weakening demand issue, its chosen response is a continuation of the current strategy, namely, dual-circulation strategy, positioning internal demand as the main growth engine while continuing to expand opportunities in global markets.The overall tone also reflects the recent geopolitical environment. China-US tensions have only intensified, with restrictions now extending from trade to investment. Like its Western counterparts, China now needs to prioritize national security rather than relying solely on economic expansion. So, what does this imply for the Chinese economy?First and most importantly, with no intention of altering the current growth model, the supply-driven economy may continue to help China achieve decent GDP growth rate (Chart 1), but it will likely remain deflationary (Chart 2), putting pressure on private investment sentiments, particularly in sectors outside the government’s industrial-policy focus, and further straining local government finances.Second, the real estate sector will no longer be a pillar for economic growth rate. The government’s intention to establish “high-quality” real estate development has made it clear that it will not revert to the old growth model fueled by surging housing prices and land-based government finance.Third, global manufacturers should brace for more intense competition from China, not only through price competitiveness but increasingly through technological capability and innovation. Beijing will also make every effort to secure its position in global supply chains, even as trade tensions and protectionism abroad become more restrictive.Overall, the no-change stance itself reaffirms the leadership’s confidence in the existing policy direction. This also suggests a low probability of broad-based expansionary stimulus in the near term, especially since the government is already on track to meet its 5% growth target, supported by solid performance in the first half of the year.Looking ahead, because the meeting also reviews the next Five-Year Plan, so the same framework to persist. Therefore, demand is likely to stay weaker than supply expansion, leading to continued economic slowdown in the coming years. The leadership’s confidence also indicates that Beijing is unlikely to show softness in the face of the geopolitical rivalry, so the trade and investment uncertainty will stay. As a result, we expect China’s economic growth to face continued headwinds and decelerate next year.