In-Depth Analysis of the Government Work Report | Domestic Demand and Technological Innovation Receive the Most Attention from Public Funds, Expected to Generate These Investment Opportunities

On March 5th, the 14th National People’s Congress held its fourth session, and Premier Li Qiang delivered the government work report.

Which statements in the report received the most attention? How will they impact the capital markets and industrial investment? Several public fund managers interviewed by The Paper stated that, from a macro policy tone, macro policies remain positive, with a focus on reform, domestic demand, and technology. Structurally, investment themes such as green low-carbon and new quality productivity are worth paying close attention to.

“Quality” is more valued than “quantity”

The 2026 government work report set an expected economic growth target of 4.5%–5% for this year, with efforts to achieve better results in practice.

Li Zhan, Chief Economist of China Merchants Fund Research Department, pointed out that using an interval format offers more flexibility. The target balances speed and quality, development and safety, aligning with market expectations and guiding all parties to focus on high-quality development, leaving room for structural transformation and reform and opening-up. At the same time, the target aligns with China’s long-term economic growth potential, laying a solid foundation for the start of the “14th Five-Year Plan” and connecting with the 2035 long-term goals.

Chen Xianshun, Chief Equity Strategist at Bosera Fund, noted that from a macro policy framework, the development expectations in this year’s government work report are essentially a balanced choice under the constraints of “stabilizing growth, stabilizing expectations, and stabilizing transformation.” First, the target reflects a priority on stable growth. Despite the global economic center shifting downward and rising trade protectionism, China still maintains a relatively steady growth target, signaling stability to the market. Second, the target considers the sustainability of structural transformation. Currently, China’s economy is transitioning from real estate-driven to technology and manufacturing-driven, with policies not relying solely on short-term stimulus but providing a reasonable growth range to support industrial upgrading and new momentum. From a capital market perspective, a stable and achievable growth target is more conducive to maintaining long-term risk premiums and corporate earnings expectations than overly high targets.

Luo Bomei Fund Investment Team pointed out that this year’s economic growth target is the first interval target since 2019. “We believe this mainly aims to leave room for structural adjustment, risk prevention, and reform promotion at the start of the year, laying a solid foundation for better development later. This indicates policy continuity or further stability, and market expectations are likely to remain steady.”

J.P. Morgan Asset Management believes that, on one hand, the 4.5%-5% annual growth target not only lays the groundwork for reaching a per capita GDP level comparable to middle-developed countries by 2035 but also considers the high uncertainty and growth challenges of the overall environment this year. This may reflect a greater emphasis on “quality” over “quantity” in the policy framework; “striving for better results in practical work” shows the government’s proactive attitude.

Caitong Fund Chief Strategist Wang Lei also stated that 2026 is the first year of the “14th Five-Year Plan,” and setting economic growth at “quality priority” is a proactive choice to foster new quality productivity, implement dual controls on carbon emissions, and achieve medium- and long-term modernization goals.

“The interval target of 4.5%-5% is a rational choice for high-quality development, new quality productivity, and green transformation at the start of the ‘14th Five-Year Plan,’ representing a strategic ‘speed adjustment’ to pursue higher quality and more sustainable growth over a longer period,” Wang Lei said.

The window for interest rate cuts may be relatively delayed

The government work report mentioned that this year will continue to implement a moderately relaxed monetary policy. It emphasizes promoting economic stability and reasonable price recovery, flexibly and efficiently using tools such as reserve requirement ratio cuts and interest rate cuts, maintaining ample liquidity, and aligning social financing scale and money supply growth with economic growth and inflation expectations.

Luo Bomei Fund Investment Team analyzed that the tone of monetary policy indicates room for reserve requirement ratio and interest rate cuts this year, but decisions will be made considering multiple goals. By maintaining a low-interest-rate environment, they aim to ease financing pressures while avoiding excessive compression of banks’ net interest margins. Regarding quantitative tools, as room for reserve requirement ratio cuts shrinks, the central bank may prefer to adjust liquidity through pledge repo, outright repo, and government bond transactions, with limited space for reserve requirement ratio reductions throughout the year.

“Regarding price tools, the need to continue adjusting policy interest rates still exists, but considering factors like banks’ net interest margins, the window for interest rate cuts may be relatively delayed,” the team said.

J.P. Morgan Asset Management believes that to achieve the annual growth target, given the persistent interest rate gap with the U.S. and the limited effect of previous rate cuts on household borrowing, monetary policy may prioritize price stability over aggressive rate reductions.

He Chang, Assistant Fund Manager at Xingyin Fund and macro researcher, also pointed out that the phrase “flexibly and efficiently use reserve requirement ratio and interest rate cuts” is consistent with last December’s economic work conference, indicating that the total magnitude of rate cuts this year will remain relatively restrained. “Maintaining ample liquidity” continues the tone set at the December quarterly meeting, suggesting that liquidity is unlikely to tighten significantly. “Promoting low-cost financing” indicates that current interest rates are within a policy-acceptable range.

The role of capital markets is upgrading

Regarding capital markets, the government work report states that efforts will be made to deepen comprehensive reform of capital market investment and financing, improve the long-term capital entry mechanism, enhance investor protection, expand private equity and venture capital exit channels, and increase the proportion of direct and equity financing.

Guotai Fund believes that the report explicitly emphasizes deepening comprehensive reform of capital market investment and financing, improving the long-term capital entry mechanism, and increasing the share of direct and equity financing, highlighting strategic importance. As the macroeconomic structure continues to optimize and upgrade, the foundation of capital market development will be further solidified, with long-term potential for growth.

Guotai Fund stated that the 2026 government work report opens up broad development space for capital markets. “Reform” and “innovation” are high-frequency keywords in the report, supporting steady development over the past two years and helping the market continue to play a leading role in economic restructuring.

Chen Xianshun pointed out that the report’s statements about capital markets send an important signal: the role of capital markets in China’s economic system is gradually upgrading from a financing platform to a core resource allocation mechanism. Recently, policy focus was more on risk prevention and regulation, but current policies emphasize enhancing market vitality and long-term capital supply.

“Future directions may include three key areas: first, continuously promoting long-term capital entry, including pensions, insurance funds, and various long-term institutional investors; second, further improving financing mechanisms for tech companies to better serve the development of new quality productivity; third, improving the quality and dividend returns of listed companies to foster a long-term investment and value-investment ecosystem. From a global perspective, a more mature and stable capital market will be a strong support for China’s long-term economic growth,” Chen said.

Domestic demand and technological innovation receive the most attention

Key statements in the Two Sessions report often contain important investment themes for the year.

Xinyuan Fund noted that as the overall price level gradually rises, profit growth of listed companies is expected to turn positive, and excess savings by residents will gradually convert into corporate deposits, supporting risk appetite for equities. Meanwhile, with the full release of the “14th Five-Year Plan” outline, fields such as new quality productivity, green transformation, and regional coordination will generate abundant structural investment opportunities. The enthusiasm for thematic investments in A-shares is expected to continue. Overall, it is likely that in 2026, A-shares will show a pattern of “oscillating upward with structural differentiation,” with sectors aligned with profit recovery and policy themes worth focusing on.

“The ranking of the top ten tasks indicates that domestic demand and technological innovation may become key pillars driving economic growth this year. More resources are expected to be allocated to these areas, and this structural economic transformation could create corresponding opportunities for companies aligned with these strategic priorities in the stock market,” J.P. Morgan Asset Management said.

Wang Lei believes that the policy signals from the Two Sessions highlight the cultivation and expansion of emerging and future industries as policy priorities. He suggests focusing on three long-term themes: one, the new quality productivity core based on high-tech manufacturing and equipment; two, the digital China theme aiming to increase the digital economy’s share from 10.5% to 12.5%; and three, the green low-carbon and energy transition theme driven by shifting from “dual control of energy consumption” to “dual control of carbon emissions.” Coupled with the 109 major projects in the “14th Five-Year Plan” focusing on new quality productivity, modern infrastructure, and green low-carbon sectors, relevant investment tracks may include computing power and industrial software, clean energy and new power systems, high-end equipment and industrial mother machines, aerospace and low-altitude economy, equipment renewal and consumer goods upgrading, as well as future industries like energy, quantum technology, embodied intelligence, brain-computer interfaces, and 6G.

(Source: The Paper)