The Chinese leadership committed for the first time to the recovery of fixed investment and signaled “limited” fiscal and monetary stimuli for 2026, focusing instead on the reorientation of public spending and support for domestic consumption.
The commitment was made during the Central Economic Work Conference, held this week in Beijing, and which serves as a strategic guide for defining next year’s macroeconomic policies.
The concrete objectives, including the GDP growth target, should only be announced in March, at the plenary session of the National People’s Assembly, the country’s highest legislative body.
According to the final statement, released by the official Xinhua news agency, the Government will “promote the stabilization and recovery of investment”, using key projects, increasing central Government investment and encouraging private investment.
Investment in fixed assets fell 1.7% between January and October, after a 0.5% drop in the first nine months of the year. The contraction was worsened by statistical revisions, but also by restrictions associated with the campaign against excessive industrial competition, known in China as ‘neijuan’ (devolution), according to analysts at US investment bank Goldman Sachs.
For Ting Lu, China economist at Japanese bank Nomura, the call to relaunch investment shows that the leadership “is fully aware of the recent sharp drop” in fixed investment, and should redirect revenues from the issuance of local public debt to infrastructure projects.
But Beijing has rejected a major stimulus package for now. “The statement suggests that there will be more political support in the coming months, but a decisive stimulus program has not yet been formulated,” Lu noted.
Also according to Julian Evans-Pritchard, from the British consultancy Capital Economics, the text “does not point to an acceleration of growth in 2026”, but could “lay the foundations for a healthier and more balanced economy in the medium term”.
Evans-Pritchard highlighted that Beijing intends to cut interest rates and bank reserve requirements (RRR), but considers that the monetary impulse “will be too timid to stimulate credit demand”. The consultant predicts cuts of 30 basis points in reference interest rates and 75 points in RRR.
The priority will continue to fall on fiscal policy, albeit in moderation. Unlike 2024, when the budget deficit was promised to “increase”, the 2025 statement only states that it “will be maintained”, without references to additional special debt issues.
Given the difficulties faced by local administrations in finding viable projects, the central government should “make better use” of its fiscal space, channeling more resources directly to the national budget.
According to Ning Zhang, an economist at the Swiss bank UBS, the conference “set a tone of continued support and more balanced policies to stabilize economic growth”, with an “expenditure optimization” expected with the reinforcement of social protection networks and consumption incentives.
Evans-Pritchard also highlighted that the Government explicitly recognized the “imbalance between robust supply and weak demand” and should adopt “special actions” to support household consumption.
Despite the recent reduction in investment in fixed assets, a retraction in public financing for the high-technology industry, including strategic sectors such as electric vehicles, semiconductors and artificial intelligence, is not expected.
The International Monetary Fund this week urged China to adopt more aggressive measures to stimulate domestic demand and warned that if it does not reduce trade surpluses, it could face retaliation from international partners.