Recent policy meetings suggest China has moved away from tariff-related emergency response mode. Upgrading and rebalancing gaining importance in the policy agenda to foster self-sustained growth. Macro policies will likely remain supportive, but we see little appetite to ramp up stimulus, Standard Chartered’s Shuang Ding and Hunter Chan report.
From ‘extraordinary’ to ‘necessary’
“The Central Economic Work Conference (CEWC), which concluded on 11 December, elaborated on the policy agenda for 2026. The top policy makers pledged to enhance ‘countercyclical and cross-cyclical adjustment’. This indicates that the authorities are looking beyond near-term volatilities following the recent US-China trade deals, and refocusing on tech-driven growth and expanding domestic demand. A year earlier, policy makers had vowed to strengthen ‘extraordinary countercyclical adjustment’, scaling up stimulus to offset the negative external shock from the looming trade wars.”
“China will ‘continue to implement more proactive fiscal policy and moderately loose monetary policy’ according to the CEWC, suggesting no major change to the macro policy stance. Policy makers pledged to maintain a ‘necessary’ deficit size, compared to ‘raising the deficit ratio’ in late 2024. We expect the official deficit ratio to be reduced slightly to 3.8% of GDP in 2026 from 4.0% in 2025. They also asked the PBoC to keep liquidity ample and use tools such as reserve requirement ratio (RRR) and policy rate cuts ‘flexibly and effectively’, suggesting there is no intention of aggressive easing. We expect a 25bps RRR cut in Q1-2026 and a 10bps policy rate cut in Q2.”
“Policy makers also vowed to prevent a further decline in investment; rectify disorderly competition; and stabilise the housing market. Boosting the services sector was highlighted in three of the eight major tasks for 2026. We expect more fiscal resources to be directed to infrastructure and further opening up the services sector.”
Source: https://www.fxstreet.com/news/china-refocusing-on-longer-term-transformation-standard-chartered-202512120948
