As tariff tensions stabilized, policymakers’ focus returned to domestic demand and innovation. The GDP growth target is likely to be set at 4.5-5.0% for 2026, with supportive macro policies. Economists at Standard Chartered raised their 2026 growth forecast to 4.6% (previously 4.3%), supported by factor productivity gains and resilient exports.
China’s policy to support consumption and growth
“The recent US-China trade agreement has somewhat eased tariff uncertainty for 2026. We expect exports to remain resilient and policy to continue to support domestic demand, especially consumption, amid the protracted housing market correction. China’s total factor productivity gains should continue to underpin growth, supported by the rapid adoption of artificial intelligence. Inflation is likely to remain weak: we lower our 2026 forecast to 0.6% from 1.0% previously due to potential weakness In food and fuel prices, the main policy challenges include balancing capacity cuts with investment stability, and optimally allocating financial resources to support government spending and the local government debt swap programme.
“We expect China’s macro policies to remain supportive of easing growth, but policymakers may avoid taking ‘too loose’ measures to protect financial stability and balance short-term economic relief with the long-term structural agenda. We expect the official budget deficit to narrow slightly to 3.8% of GDP in 2026 (from 4.0% in 2025), with central and local special bond issuance likely to remain significant to finance government spending and the local government hidden debt swap program.” People’s Bank China (PBoC) To inject sufficient liquidity to facilitate government bond supply, we are moving forward our expected 10 basis point rate cut schedule to Q2 2026 (from Q4 2025) and now expect a 25 basis point cut in the Reserve Requirement Ratio (RRR) in Q1 as the central bank shifts its focus to 2026.
“China’s 15th Five-Year Plan prioritizes consumption and creativity. New growth engines are already replacing traditional ones, albeit gradually. The new economy, especially consumption- and technology-oriented sectors, is bound to gain a larger share of GDP at the expense of the real estate sector in the coming years.”
