Commentary: Beijing’s Plan to Revive Growth and Tame Risk

The recent Central Economic Work Conference in China, a vital annual meeting that establishes the nation's core economic and policy priorities, addressed the country's current economic difficulties, characterizing them as manageable challenges arising from development and transition periods. The official communiqué expressed optimism that these issues can be resolved through persistent effort, reinforcing the leadership's confidence in stabilizing and advancing the economy[para. 1].

For the 2026 economic agenda, Chinese policymakers are proposing a comprehensive plan to rejuvenate domestic demand, stabilize declining investment, and address the mounting debts of local governments. The program aims to crack down on inefficient or "involutionary" competition, support the troubled property sector, and foster new drivers of economic growth. The policy focus will rest on three major shifts: a more proactive fiscal policy, an accommodative monetary policy, and a targeted industrial strategy prioritizing high-tech sectors and market regulation[para. 2]. In essence, the government is preparing for a significant increase in economic stimulus[para. 3].

At the heart of the new approach is a decisive move toward aggressive macroeconomic easing. This maintains last year’s adjustment in policy language, describing the fiscal policy as “more proactive” and monetary policy as “moderately accommodative.” By promising to fully utilize the economy’s potential with proactive measures, Beijing hopes to avoid the premature policy tightening that contributed to market corrections and a slowdown in recent years, especially following the initial COVID-19 recovery period. The leadership is now keen to prevent sharp declines in asset prices and maintain economic momentum[para. 4][para. 5].

Fiscal measures will play a major role. The government plans to keep the deficit-to-GDP ratio at a high 4% in 2026, issue at least 1.5 trillion yuan ($210 billion) in ultra-long-term special treasury bonds, and potentially expand special-purpose bonds for infrastructure to 5 trillion yuan ($700 billion). These moves aim to support local governments, many of which are struggling with significant debt loads. For example, 1.4 trillion yuan ($196 billion) of new local special-purpose bonds in 2025 were used for debt service, surpassing planned allocations and limiting funds for new projects. The larger bond quota in 2026 is designed to ensure both debt resolution and investment. In addition, tax reforms are anticipated, potentially altering revenue-sharing formulas and expanding local government access to key tax streams such as value-added and consumption taxes[para. 6][para. 7].

On the monetary policy front, the People’s Bank of China is directed to ensure stable economic growth and price recovery. This includes using tools such as interest rate cuts and reductions in the reserve requirement ratio, alongside targeted support for specific sectors like technology and small businesses. The policy explicitly mentions using flexible and efficient measures to sustain ample market liquidity and guiding financial institutions to increase support for priority areas[para. 8][para. 9].

Addressing weak domestic demand is identified as a top priority. The state will prioritize increasing household incomes and stimulating consumption, especially in services, where there is still growth potential compared to durable goods, which may have demand fatigue after prior subsidy rounds. Investment stability will be sought by increasing central budget allocations, launching major projects under the upcoming 15th Five-Year Plan, and supporting urban renewal. For real estate, the approach will involve city-by-city management, incentivizing affordable housing, and providing various forms of demand-side support, though overall investment in the sector is expected to remain subdued[para. 10][para. 11][para. 12].

The second key agenda item is driving innovation and developing new growth sectors. Beijing will support industrial upgrades, embrace AI applications, expand the service sector, advance new energy systems, and promote marine economy development. Efforts will also be made to curb wasteful competition in industries with overcapacity, which should ease deflationary pressures and improve producer prices[para. 13][para. 14][para. 15].

The article reflects the expert opinion of Zhou Junzhi, emphasizing the government’s commitment to a broad and aggressive policy response to secure stable growth and structural transformation in 2026[para. 16][para. 17].