With tariff tensions stabilising, policy makers’ focus has returned to domestic demand and innovation. GDP growth target likely to be set at 4.5-5.0% for 2026, with supportive macro policies. Standard Chartered's economists raise their 2026 growth forecast to 4.6% (4.3% prior), supported by TFP gain and resilient exports.

China policy to support consumption, growth

"The latest US-China trade agreement has eased tariff uncertainty somewhat for 2026. We expect exports to stay resilient and policy to continue to support domestic demand, especially consumption, amid the prolonged housing-market correction. China’s total factor productivity (TFP) gains should continue to fuel growth, aided by rapid AI adoption. Inflation is likely to remain subdued: we lower our 2026 forecast to 0.6% from 1.0% prior on likely food and fuel price weakness. Key policy challenges include balancing capacity cuts with investment stabilisation, and allocating fiscal resources optimally to support government spending and the local-government debt swap programme."

"We expect China’s macro policies to remain supportive to cushion growth, but policy makers may avoid ‘ultra-loose’ measures to safeguard 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 sizeable to fund both government spending and the local-government hidden debt swap programme. We expect the PBoC to inject sufficient liquidity to facilitate government bond supply. We move forward our forecast timeline for a 10bps policy rate cut to Q2-2026 (from Q4-2025 prior) and now expect a 25bps cut in the reserve requirement ratio (RRR) in Q1 as the central bank shifts its focus to 2026."

"China’s 15th Five-Year Plan (FYP) prioritises consumption and innovation. New growth engines are already replacing traditional ones, albeit gradually. The new economy, especially consumption-oriented and tech-driven sectors, should gain a greater share of GDP at the expense of the property sector in the coming years."