MNI: China's Positive 2026 Policy Tone Aimed At 5% GDP

China’s policymakers will reaffirm an expansionary fiscal and monetary policy stance at an upcoming annual key meeting to underpin a potential 5% economic growth target for 2026, policy advisors told MNI, adding that the deficit-to-GDP ratio is likely to remain around 4% while treasury and local-government bond issuance is set to increase.

Officials at next week’s Central Economic Work Conference (CEWC) are likely to place greater weight on growth and calibrate policy intensity around a 5% GDP target to ensure a strong start to the 15th Five-Year Plan period, advisors said, adding the formal growth target will be announced at the Two Sessions in March. 

Zhao Xijun, co-dean of the China Capital Market Research Institute at Renmin University, said achieving 5% growth will be challenging for an economy of China’s size, prompting the CEWC to maintain a “proactive” fiscal stance and an “accommodative” monetary policy, with demand expansion as the core focus.

Shen Jianguang, vice president and chief economist of JD Group, said the CEWC will likely focus on promoting consumption, stabilising property and curbing “involutionary” competition, with fiscal policy taking the lead as monetary tools are constrained by weak credit demand and narrowing bank margins. Shen expects the deficit-to-GDP ratio to remain around 4% in 2026, with issuance of ultra-long-term special treasury bonds and local government special bonds rising from 2025’s CNY1.3 trillion and CNY4.4 trillion. 

Xu Hongcai, deputy director of the China Association of Policy Science’s Economic Policy Commission, expects at least CNY1.5 trillion in special treasury bond issuance , noting that investment – mainly in national projects planned for the 15th Five-Year Plan – will remain the key driver of short-term growth, while consumption will require more innovative policy support.

(See MNI: China To Front Load CNY2 Trillion Of 2026 Bonds)

POLICY CONSTRAINTS

While Xu sees scope for at least a 50 basis point cut in the reserve-requirement ratio and a 10-20bp reduction in interest rates, Zhao said any easing would be cautious given its declining effectiveness in driving credit demand as China’s economy shifts from scale expansion to quality-driven growth.

Zhao urged the central bank to prioritise building a well-functioning risk-free yield curve to strengthen monetary transmission, warning that easing without solid credit demand could lead to idle funds in the financial system. Greater fiscal-monetary coordination and expanded use of structural tools are also expected, he pointed out. 

CONSUMPTION FOCUS

As the 15th Five-Year Plan proposal highlighted the need for a “significant increase” in household consumption for the first time, Shen said short-term stimulus will need to align with longer-term reforms, noting retail sales growth – which slowed to 2.9% y/y in October – is likely to remain under pressure until H1 2026. 

Policymakers are expected to expand consumer subsidies to maternal, infant and health-related goods, promote nationwide service-consumption vouchers and encourage new forms of consumption, he added.

Xu, also chairman at Beijing Honglve Consulting Limited Company, said authorities should target a one-percentage-point annual rise in the consumption-to-GDP ratio from its current 39.9% by the middle of this century to match with the global average of about 60%, supported by income growth and equalisation of public services. He also called for stronger central-government spending to reduce regional disparities in basic social welfare, and higher rural pensions to lift low-income consumption funded by the gratuitous transfer of as much as CNY5 trillion by the shares of the state-owned companies listed in Shanghai and Shenzhen stock exchanges to supplement the social security and pension funds. 

Shen added that reversing the property downturn remains a top priority, suggesting the full removal of purchase restrictions in first-tier cities, lower home-buying costs and central-government funding to accelerate the acquisition of unsold homes and land. (See MNI: China's Lower Home Prices To Pressure Bank Disposals)