The economic policy laid out at a top leadership meeting highlighted Beijing’s long-term strategic thinking with an emphasis on further deepening structural and market-oriented reforms to substantially boost domestic demand as China faces rising external uncertainties, economists said on Friday.

Despite the country’s strong economic rebound in the second quarter, the top leadership acknowledged that the economic situation remains complex and serious and many challenges facing the country are mid- and long-term issues that should be seen from the perspective of a “protracted war”.

The statement was made at the meeting of the Political Bureau of the Communist Party of China Central Committee on Thursday. The meeting was presided over by Xi Jinping, general secretary of the CPC Central Committee.

The top policymakers also pledged to substantially expand domestic demand and accelerate the formation of a dual-cycle development pattern to drive China’s growth. That means the country will rely on both domestic and international economic cycles, with the domestic cycle being the mainstay.

The meeting set the tone for China’s economic policy in the second half of the year as the country faces growing external uncertainties amid the COVID-19 pandemic. The global economy is projected to fall into recession this year as the economy of the United States contracted by a massive 32.9 percent in the second quarter on a quarterly basis while the German economy shrank by 10.1 percent.

Experts said that the message from the meeting suggests that China is paying more attention to the longer-term structural issues and challenges while continuing with its existing policies to stabilize employment and corporate operations to cope with short-term shocks generated by the pandemic.

“Given the rising external uncertainties and the possibility of escalating tensions with the US, structural reforms to broaden the home market and boost domestic demand will help China offset some negative impact from a deteriorating external environment and shrinking external demand,” Zhang Ming, an economist at the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, said in a research note.

While China’s recovery is expected to be on a steady path after a stronger-than-expected rebound in the second quarter, analysts said that Beijing is likely to further fine-tune its fiscal and monetary policies.

“If the government wants to expand domestic demand, it is crucial to create more jobs and increase households’ income. It is also important to improve the wealth distribution system and social protection to further unleash the country’s consumption potential,” said Xu Hongcai, deputy director of the China Association of Policy Sciences’ economic policy committee.

Those at the meeting on Thursday decided that fiscal policy will be more proactive and effective while monetary policy will be more targeted and flexible. They also vowed to channel more funding to the manufacturing sector and smaller businesses.

But analysts said that the chance to roll out large policy easing as in the first quarter is small as policymakers are paying close attention to the risks in the financial markets and the property sector.

At Thursday’s meeting, the top leadership emphasized promotion of the healthy and stable development of the capital markets by cracking down on illegal activities and maintaining stable development of the property market by curbing speculative trading.

“I think China’s policy is unlikely to be as loose as it was in the first half of the year as the policy objective appears to be shifting to striking a balance between supporting economic growth and containing risks in the financial and property markets,” said Xu Gao, chief economist at BOC International.

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