Two Sessions | Chief Economist Interprets New Policy Signals!

From fine-tuning growth targets to reform and innovation layouts, from boosting domestic demand to ensuring people’s livelihoods, the 2026 Government Work Report is packed with substantive content.

Recently, chief economists from institutions such as HSBC, Citibank, Standard Chartered, JPMorgan Chase, and Deutsche Bank shared their views on the latest policy trends. They believe that the policy signals for 2026 are clear and pragmatic, marking the beginning of a new policy cycle that emphasizes “building a foundation and benefiting long-term development.”

Pragmatic Growth Goals

The 2026 Government Work Report proposes that this year’s main development target is: economic growth of 4.5%–5%, with efforts to achieve better results in practice. This goal aligns with the expectations of many foreign institutional chief economists.

“This target reflects the decision-makers’ focus on achieving qualitative improvements and reasonable quantitative growth in economic development, promoting high-quality development that is steady and sustainable,” said Liu Jing, Chief Economist for Greater China at HSBC Global Research. She noted that the government’s growth target of 4.5%–5% this year is consistent with HSBC’s previous expectations. Liu also believes that, given 2026 is the start of the “14th Five-Year Plan,” this growth rate target leaves room for the implementation of related reforms.

Citibank Greater China Chief Economist and Managing Director Yu Xiangrong stated that a key signal from this year’s government work report is that 2026 will be a year of nominal growth recovery. “The report seeks a more cautious balance between short-term economic operation and long-term structural reforms, avoiding strong stimulus and focusing on laying a foundation. More importantly, it explicitly mentions improving supply and demand relations and pushing the overall price level from negative to positive.”

“In our view, employment targets are more important than growth figures. The goals for new employment and unemployment rate remain unchanged,” Yu Xiangrong said. Another key signal in the report is “re-inflation.” It explicitly states the goal to “push the overall price level from negative to positive” and aims for “moderate recovery in consumer prices.” According to Citi’s estimates, the implied nominal growth rate in the budget report slightly exceeds 5%, higher than the actual growth target, indicating that the GDP deflator needs to achieve positive growth. If successful, this would significantly improve industrial profits and market confidence.

Standard Chartered’s Greater China and North Asia Chief Economist Ding Shuang’s team pointed out that there is moderate upside potential for the 2026 GDP growth forecast of 4.6%. “The policy emphasizes high-quality growth while reserving space for structural adjustments. The report’s mention of ‘striving for better results’ suggests that 4.5% could be the baseline for 2026.”

“While the overall policy orientation in this year’s government work report is more pragmatic, it still continues the planning and focus of the past year,” said Zhu Feng, Chief Economist for China at JPMorgan Chase and Head of Greater China Economic Research. From a policy perspective, the government’s recognition of the current global situation and severe economic challenges, along with proactive planning, makes the growth target of 4.5%–5% more realistic and increases policy flexibility.

Shift in Macro Policy Focus

According to Yu Xiangrong, the macro policy focus is shifting from counter-cyclical regulation to cross-cycle regulation—short-term stimulus policies remain restrained but are more coordinated, leaving room for medium- and long-term structural adjustments and risk prevention.

“We estimate that this year’s fiscal expansion will be roughly the same as last year, with special bonds and local government专项 bonds maintaining their scale, and only the general public budget deficit increasing by 230 billion yuan,” Yu Xiangrong said. He expects that a larger increase will come from quasi-fiscal tools—policy financial instruments will expand from 500 billion yuan to 800 billion yuan. “Together, these measures will add over 500 billion yuan in stimulus this year, aligning with the pragmatic growth goal and leaving room for future policy space,” he added.

Regarding monetary policy, Citi estimates that about 80 trillion yuan in household deposits will mature this year, and their renewal at low interest rates or as demand deposits will significantly ease banks’ interest margin pressures and open space for interest rate cuts. The renminbi has resumed its appreciation trend, and external constraints have eased. “However, a subtle change in the wording of this year’s government work report is worth noting: it emphasizes promoting the ‘low operation’ of overall social financing costs rather than ‘reducing’ them,” said Yu Xiangrong.

Citi also expects a 50 basis point cut in reserve requirement ratio (RRR) and a 10 basis point reduction in interest rates this year, with RRR cuts taking priority and having more room. Additionally, structural tools will become important, precisely supporting new productive forces and key sectors like consumer services, improving policy transmission efficiency. “Although fiscal and monetary policies are restrained individually, macro regulation this year will focus more on coordination to amplify policy effects,” Yu Xiangrong said.

Standard Chartered’s Greater China and North Asia Chief Economist Ding Shuang’s team noted that fiscal support remains strong, with a deficit ratio planned at 4%. The issuance of ultra-long special bonds and local government专项 bonds will remain sizable, used for infrastructure, equipment upgrades, and balance sheet repair. The nominal scale of government bond issuance will be roughly the same as in 2025, with a slight decline in the ratio to GDP.

“We preliminarily estimate that the broad fiscal deficit ratio could fall to 8%–9% of GDP, compared to 9% in 2025, with actual implementation at around 8.1%. This reflects that, as tariffs’ impact gradually diminishes, policy stance is returning to normal,” Ding Shuang’s team said.

Innovation and Domestic Demand Remain Priorities

As policies shift from macro to micro, the focus on boosting domestic demand is also undergoing structural changes. Deutsche Bank Chief Economist for Greater China, Xiong Yi, stated that stimulating consumption remains the top macro policy task this year, with a particular emphasis on unleashing the potential of service consumption.

Through a series of policies such as removing supply restrictions in various service sectors, enriching and upgrading consumption scenarios, and improving leave policies to increase residents’ leisure time, China’s residents’ consumption potential in leisure, tourism, health, and elderly care is expected to be fully released.

Additionally, policies have sent stronger signals to regulate long-standing “involution” competition among enterprises. Liu Jing from HSBC Global Research noted that the government work report this year places “deepening the construction of a unified national market” at the forefront of reform efforts, mentioning the use of capacity regulation, standard setting, price enforcement, and quality supervision to thoroughly address “involution” competition.

“We believe that measures aimed at regulating industry competition and local government economic promotion behaviors are likely to be introduced and implemented within the year, potentially accelerating the narrowing of PPI declines and achieving positive growth within the year. In the medium to long term, continued regulation of supply-side competition will be key to more efficient resource allocation and marketization, boosting innovation vitality and industry profit margins, and providing a solid foundation for high-quality economic development,” Liu Jing said.

Xiong Yi also mentioned that “anti-involution” remains a policy focus, with possible fine-tuning of methods. Regulating local government economic promotion and subsidy behaviors is seen as crucial to curbing capacity expansion and “involution” competition.

Overall, the policy signals for 2026 are clear and pragmatic. On one hand, facing complex domestic and international environments, the decision-makers have moderately lowered growth targets and maintained overall policy strength, leaving room for long-term reforms. On the other hand, the shift toward “service consumption” and the crackdown on “involution” indicate that policies are aiming to fundamentally unblock economic cycles.

Layout: Yang Yucheng

Proofreading: Wang Wei