China signalled it will maintain economic support but refrain from ramping up stimulus next year, underscoring a shift from defending against US tariffs to securing growth in the longer term.
The leadership will “flexibly and efficiently” use interest rate and reserve requirement cuts to ensure sufficient liquidity, and maintain a “necessary” level of budget deficit and government spending in 2026, according to an official readout released Thursday following the conclusion of the Central Economic Work Conference.
The language of the meeting suggests a desire to keep stimulus measured after China emerged from a trade war with the US largely unscathed, thanks to booming exports to the rest of the world. It shows policymakers are content with current policies, allowing them to stick to a manufacturing-led growth strategy even as they take steps to boost consumption.
“Economic policy was in an emergency mode a year ago due to external uncertainties. This year, policies are focusing more on the longer term,” said Ding Shuang, chief economist for Greater China and North Asia for Standard Chartered Plc. “There’s no reason for policies to be more expansionary.”
Attended by senior officials including President Xi Jinping, the conference sets economic policy priorities for the coming year. In a sign of greater recognition of several growth headwinds, officials vowed to stop the sharp slump in investment, steady the deteriorating housing market and stabilise the dwindling new births.
The latest policy signals come as the world’s No 2 economy is set to conclude a surprisingly resilient year. The strength in exports propelled economic growth, with the annual goods trade surplus exceeding $1tn for the first time.
Other headwinds are also growing. Fixed-asset investment saw an unprecedented collapse in the second half of 2025, deepening worries over languishing domestic demand. To counter that, officials pledged to increase central government’s budget spending on investment projects.
China may find boosting infrastructure investment a more worthwhile endeavour, given the waning impact of consumer subsidies on retail sales. The conference mentioned the subsidy policy will be “optimised,” suggesting limited space for its expansion in size. Some economists predict the programme may be extended to cover services spending, as the sector receives increasing government attention.
Meanwhile, officials promised to “pay due attention” to addressing local government fiscal strains and advance efforts to resolve local debt risks in an active but “orderly” way. Multiple measures will be taken to reduce the operational debt risks of local government financing vehicles, they added.
Another major concern is growing troubles in the property market, after state-backed developer China Vanke Co shocked markets with a proposal to delay bond repayment.
The conference laid out a clear destocking mandate for the sector, pledging to “control new supply.” Policymakers explicitly encouraged the acquisition of unsold commercial housing to be converted into affordable housing. Previously, Bloomberg reported that China was considering new measures such as providing new homebuyers mortgage subsidies for the first time nationwide.
“The emphasis on property stabilisation is a pleasant surprise,” said Michelle Lam, Greater China economist at Societe Generale SA. “Of course we still need to know how forceful the property measures are but it shows policymakers are mindful about the downside risks. So that should help to alleviate the downtrend in property prices.”
Policymakers reiterated a long-held pledge to maintain the basic stability of the yuan exchange rate. That signals an aversion for any sudden or significant moves, despite growing calls for China to strengthen the yuan to reduce its massive trade surplus and rebalance toward consumption.
The latest reiteration of a “more proactive” fiscal policy comes after the augmented deficit expanded to 8.7% of gross domestic product in the first three quarters of this year — the highest level in data back to 2010.
Many economists expect Beijing to set the official budget deficit at around 4% of GDP, the same as in 2025, which was the highest level in more than three decades.
Monetary policy would target a “reasonable recovery in prices,” according the conference, acknowledging the drag caused by weak domestic demand and entrenched deflation.
Despite the pledge on monetary easing, the People’s Bank of China has in fact turned more cautious with policy this year. Its policy interest rate cut has disappointed markets, and in a November report it downplayed the slowdown in loan growth and signalled a more patient approach with the economy’s transition.
A year ago, the work conference also pledged to adopt rate cuts and RRR reductions — which lower the amount of cash banks must keep in reserves and free up money for lending — the first mention of the tools in such occasions in at least a decade. The PBoC ended up cutting rates and RRR about six months after the meeting.
“The meeting did mention rate cuts, but in terms of the actual extent of it, markets don’t really have high expectations,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management. “I don’t think this meeting will significantly boost people’s expectations for rate cuts next year.”
