20260731-招银国际-China_Policy_Politburo_signals_more_accommodative_policy_support_5页_752kb

China Policy Summary - 2H26 Outlook

Core Content

The July 2026 Politburo meeting signals a mildly more accommodative policy stance in the second half of 2026, as the leadership acknowledges economic difficulties and emphasizes stronger countercyclical adjustments. The policy direction aims to prevent further slowdown, stabilize expectations, and secure a credible start to the 15th Five-Year Plan.

Main Policy Directions

1. Fiscal and Monetary Policy

• Fiscal spending is expected to accelerate, shifting from de facto tightening in 1H26 to a more expansionary stance in 2H26.
• The meeting emphasized the use of 800 billion yuan in new policy-based financial instruments and coordinated investment in six strategic infrastructure networks to improve fixed-asset investment (FAI) growth.
• Monetary policy will focus on targeted financing and execution, rather than broad stimulus. A modest rate cut is possible in 4Q26 as economic momentum continues to weaken.

2. Consumption and Real Estate

• Consumption support remains supply-side and services-oriented, with an emphasis on quality supply, services consumption, and infrastructure that boosts household willingness to spend.
• Real estate will see targeted stabilization through funding coordination, urban renewal, mortgage-cost relief, and risk containment, rather than a full-scale easing cycle.

3. Technology and Capital Markets

• Technology remains a key policy priority, with continued support for basic research, AI+, intelligent economy, frontier technology, and traditional-sector upgrades.
• Capital markets are expected to see improved confidence and market resilience, with potential state-backed buying during volatility to stabilize secondary-market sentiment.

4. Trade and Platform Economy

• The meeting explicitly called for trade rebalancing, responding to external pressures from Europe due to China's goods surplus.
• A broader mix of policies is expected, including expanding services trade, increasing economic cooperation, and attracting foreign capital.
• The platform economy will be regulated, healthy, and sustainable, with targeted regulation focusing on anti-involution, fair competition, consumer rights, data governance, and algorithm control. However, this is not expected to return to the broad internet crackdown seen in 2022.

Market Implications

• The Hong Kong equity market may perform better in 2H26 due to earnings rebounds, stronger policy support, and easing liquidity pressures from the Fed.
• Fixed income markets may face mild supply pressure from faster fiscal spending and heavier bond issuance, but yields are expected to remain range-bound due to ample liquidity and potential rate easing.
• GDP growth is projected to slow from 5.0% in 2025 to 4.6% in 2026, with a moderate decline from 4.7% in 1H26 to 4.6% in 2H26.
• Risk appetite in AI, advanced manufacturing, services consumption, and policy-linked infrastructure is expected to improve, while property and discretionary consumption may remain underperforming.

Key Figures and Data

• Figure 1: K-shaped divergence (Source: Wind, CMBIGM)
• Figure 2: Economic activity and equity market (Source: Wind, CMBIGM)
• Figure 3: Recovery rate of new housing sales compared to 2018-2019 (Source: Wind, CMBIGM)
• Figure 4: Recovery rate of second-hand housing sales compared to 2019 (Source: Wind, CMBIGM)
• Figure 5: PPI, business income tax and industrial cycle (Source: Wind, CMBIGM)
• Figure 6: MSCI China index and CRB mental price (Source: Wind, CMBIGM)
• Figure 7: Core CPI and 2Y Treasury rate (Source: Wind, CMBIGM)
• Figure 8: Loans to real economy sectors (Source: Wind, CMBIGM)

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