宏观经济深度分析：顺应民心，提振内需

30 September 2025 Cheng Shi,PhD(852) 2683 3231shi.cheng@icbci.icbc.com.cn Amid the complex international environment and domestic transformation, China’seconomy is entering a critical stage. In this context, the Political Bureau of theCentral Committee of the Communist Party of China convened a meeting onSeptember 29 to discuss and formulate major issues related to the 15th Five-YearPlan for national economic and social development. The meeting emphasized thatdevelopmentduring the 15th Five-Year Plan period must adhere to thepeople-centeredapproach and high-quality development,while balancingdevelopmentand security.Whether accelerating the construction of a newdevelopment framework or achieving high-quality growth, domestic demand is thekey issue that cannot be skirted around. Demand is not about externality, but rathera natural product of people’s sense of security, expectations and aspirations. Byfollowing the trend and tapping into potential, domestic demand is expected tobecome a stronger economic driver. From an academic perspective, this alignsclosely with Keynes’ theory of effective demand, Friedman’s permanent incomehypothesis, and the prospect theory of behavioural economics. On the macro level, itis necessary to stabilize total demand through the effective combination of awell-functioning market and an active government. On the micro level, it is essentialto invigorate domestic demand by improving people’s long-term income expectationsand companies’ long-term return expectations. On the behavioural level, it isimportant to alleviate loss aversion and risk-averse psychology through policycertainty. As a result, macro-level strategies and academic logic resonate with thepeople's will as well as the coordinated effort to boost consumption and investment,laying a solid foundation for domestic demand under the 15th Five-Year Plan. Jessica Xu, PhD(852) 2683 3777jessica.xu@icbci.icbc.com.cn Macro: the combination of effective demand, an efficient market and a proactivegovernment in Keynes’ theory.In his book “The General Theory of Employment,Interest and Money,” Keynes introduced the Effective Demand Theory1, emphasizingthat economic growth is not automatic but depends on total demand. Total demandconsists of consumption and investment, both of which are influenced by confidenceand expectations. From the consumption perspective, Keynes noted that householdconsumption depends on the marginal propensity to consume. This tendency is notfixed but highly influenced by factors such as employment and social security. Ifemployment is stable and social security is well-established, households tend toincrease their consumption. Conversely, if future income is uncertain, households tendto save more. Empirical studies2show that the proportion of social security andemployment expenditures has a highly significant impact (at the 1% significance level)on the final consumption rate, which confirms that an improved social security systemhelps increase the consumption rate. At the same time, excessive income inequalitymay suppress consumption. From the investment perspective, Keynes emphasized themarginal efficiency of capital. Whether companies expand their investment largelydepends on their expectations of future profits. If market demand is stable and policyguidance is clear, companies will actively plan and increase their investment, therebyenhancing their long-term competitiveness. Keynes’ logic closely aligns with thePolitical Bureau meeting’s call for “the further combination of an effective market anda proactive government.” Consumption and investment are driven by the confidence of market participants, but they also need to be actively stabilized and guided by thegovernment at critical moments. Under this framework, stabilizing the people andenterprises’ confidence and promoting both consumption and investment will becomethe strategic focus for the next five years. Micro: Friedman’s “Permanent Income Hypothesis” and long-term expectations.While Keynes emphasized overall balance at the macro level, Friedman revealed thelong-term logic of consumption and investment at the micro level. In his book “ATheory of the Consumption Function,” he proposed the Permanent Income Hypothesis3, which suggests that individual consumption does not depend on short-term income,but rather on expectations of long-term sustainable income. From the householdperspective, one-time subsidies or coupons are unlikely to fundamentally changeconsumption behaviour, whereas long-term wage growth has a significant positiveimpact on the marginal propensity to consume among middle-income groups. In otherwords, only when households are confident that their future income will steadily growwill their consumption intentions truly be realized. From the corporate perspective, thelogic of investment is highly similar to that of household consumption. The key tocorporate decision-making lies in whether the internal rate of return of an investmentproje