At the "China Finance 2025 Annual Conference" held in Beijing on December 7, Yao Yang, Dean of the Dishui Lake Advanced Finance Institute at Shanghai University of Finance and Economics and Visiting Professor at Peking University, delivered a speech addressing China's economic challenges.

Yao identified insufficient short-term demand as the primary issue facing China's economy. He emphasized that short-term problems require short-term solutions, with infrastructure investment being the most direct approach. However, he noted that infrastructure investment has turned negative this year, largely due to local governments lacking both the capacity and willingness to act.

To address this, Yao proposed two key policy measures: 1. **Central Government Funding Commitment**: The central government must provide substantial financial support to resolve local governments' funding shortages. "Expecting local governments to borrow for investment when they’re already cash-strapped is unrealistic," Yao stated. While the central government has issued 4.4 trillion yuan in special bonds this year to support localities, he argued this effort remains insufficient.

2. **Stabilizing the Real Estate Market**: Yao highlighted the real estate sector as a major drag on the economy. Drawing a parallel with the stock market, he suggested that central government intervention could restore confidence. "Last September, the stock market rebounded and sustained growth because state-backed funds stepped in, signaling strong government support. The property market needs the same approach—direct central government funding rather than relying on local governments to acquire land or unsold homes. If the central government acts decisively, stabilizing real estate is achievable."

Yao reiterated that proactive central government measures are essential to revive demand in the short term by stabilizing both the property market and local fiscal expenditures.

Disclaimer: The conference transcript was compiled from live notes and has not been reviewed by the speaker. The content is intended for informational purposes only and does not reflect endorsement of the views presented.

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