20251212-招银国际-China_Policy_Moderate_stimulus_in_2026_5页_732kb

China Economic Policy Outlook 2026: Summary

Overview

According to the CMB International Global Markets report from December 12, 2025, the Central Economic Work Conference (CEWC) set a tone of moderate stimulus for fiscal and monetary policies in 2026. The main priorities are expanding consumption, preventing fixed asset investment declines, stabilizing the property market, and managing systemic risks. Forecasts suggest continued moderate growth with easing deflationary pressures.

Key Fiscal Policy Outcomes and Actions

Actions:

• Fiscal policy will be more active with fiscal deficits possibly expanding to 8.5% of GDP in 2026 (compared to 8.4% in 2025).
• Issue ultra-long treasury bonds to fund durable consumption and business equipment subsidies.
• Focus public investment on infrastructure and people-centric endeavors.

Initiatives for Expanding Demand:

• Trade-in subsidies for durable goods.
• Increase household disposable income and social security measures to boost consumption.
• Raise retirement and urban/rural pension standards.
• Enhance unemployment insurance coverage and lower unemployment to improve savings and consumption decisions.
• Increase fiscal transfers to low-income households.
• Expand long-term care insurance and medical insurance subsidies to reduce precautionary savings.

Monetary Policy and RRR

Key Expectations:

• The PBOC will likely cut RRR by 50bps in 1Q26 and possibly another 50bps in 3Q26.
• Expectations of lower LPRs by 20bps in total for 2026 (10bps in 1Q, 10bps in 3Q).
• Lower money market rates and mitigated liquidity pressure.

GDP and Growth Outlook

• Estimated GDP growth for full-year 2026: 4.8% (slightly below 2025's 5%).
• Short-term trajectory: slowing growth in 4Q2025 and 1Q2026 before a potential mild pick-up in H2026.
• CPI and PPI growth are expected to moderate, with CPI rising to 0.7% and PPI narrowing its YoY decline to -0.5%.

Other Key Areas

Price Levels

• Deflationary pressure decreases due to rising commodity prices and sectoral supply-demand rebalancing.

Currency Expectations

• RMB is expected to strengthen against the USD, falling from 7.07 at end-2025 to 7.02 at end-2026.

Top Priority: Domestic Demand Expansion

• Consumption growth expected to be flat in 2026,
• Retail sales growth may slow but service consumption may pick up.
• Fixed asset investment to stabilize after recent declines.

Policy Focus Areas

• AI Promotion: AI infrastructure, governance, and “AI+” initiatives.
• Green energy investments aligned with “dual-carbon” agenda and integrated with two-new policy.
• Stabilization of birth scale and expansion of long-term care insurance.
• Lighter emphasis on aggressive property market rescue plans.

Support for Low-Income Households and Social Safety Nets

• Expansion of fiscal transfers.
• Improved pension systems.
• Measures to strengthen social safety nets to support consumption.

Summary Indicators (Forecast vs Actual)

This report focuses on CMB’s economic outlook for 2026 and the supporting policy measures anticipated through the year, including expectations of slowing growth, structural reforms in various sectors, and social policy enhancements aimed at mitigating economic risks.