Chief Economist of Foreign Institutions Interprets the Government Work Report: Maintaining the Bottom Line of Economic Growth, Macroeconomic Policy Shifts Toward Cross-Cycle Adjustment

Securities Times Reporter Li Yingchao

From a slight adjustment in growth targets to a focus on reform and innovation, from boosting domestic demand to ensuring people’s livelihoods, from employment to education… The 2026 government work report mentions these topics one by one, full of valuable insights.

Regarding the latest policy trend signals released during this year’s National People’s Congress, chief economists from institutions such as HSBC, Citibank, Standard Chartered, JPMorgan Chase, and Deutsche Bank have recently shared their expectations. 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 the long term.”

Economic Growth Goals

More Practical

This year’s government work report sets the GDP growth target at a range of 4.5% to 5%, which aligns with the expectations of many foreign economic institutions’ 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. The 4.5%–5% range-based growth target also aligns with HSBC’s previous expectations. Additionally, since 2026 marks the start of the 14th Five-Year Plan, this growth speed provides room for the implementation of related reforms.

Yu Xiangrong, Chief Economist and Managing Director of Greater China at Citibank, 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 aggressive 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. This year, both new employment and unemployment rate targets remain unchanged,” Yu Xiangrong said. Another key signal from the report is “re-inflation,” explicitly aiming to “push the overall price level from negative to positive” and striving for “moderate and reasonable growth in consumer prices.” According to Citi’s calculations, the implied nominal growth rate in the budget report slightly exceeds 5%, higher than the actual growth target, meaning the GDP deflator needs to achieve positive growth. If this can be achieved, it will significantly improve industrial profits and market confidence.

Standard Chartered’s Greater China and North Asia Chief Economist Ding Shuang and his team predict that GDP growth in 2026 has moderate upside potential. “The policy focuses on high-quality growth while reserving space for structural adjustments. The report’s statement about ‘striving for better results’ suggests that 4.5% could be the baseline for economic growth in 2026.”

“The policy orientation of this year’s government work report is noticeably more pragmatic. Although there are some adjustments in focus, it overall continues the planning and work priorities of the past year, serving as a bridge between the conclusion of the 14th Five-Year Plan and the start of the 15th,” said Zhu Feng, Chief Economist for China at JPMorgan Chase and Head of Greater China Economic Research. From a policy perspective, the government recognizes the current global situation and severe economic challenges and actively plans responses. Setting the growth target at 4.5%–5% is more realistic and allows for greater policy flexibility.

Macroeconomic Policy Focus Is Shifting

In Yu Xiangrong’s view, the focus of macro policies is shifting from counter-cyclical to cross-cyclical 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专项债 (special bonds) maintaining similar scales, and only the general public budget deficit increasing by 230 billion yuan,” Yu Xiangrong said. He expects larger increments will come from quasi-fiscal tools—policy financial instruments increasing from 500 billion to 800 billion yuan. “Together, the total stimulus this year exceeds 500 billion yuan, aligning with a 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 or as demand deposits will significantly ease banks’ interest margin pressures and open space for interest rate cuts. Yu Xiangrong noted, “The renminbi is regaining appreciation momentum, and external constraints are easing. However, a subtle change in the wording of this year’s government work report is worth noting: it emphasizes promoting the ‘low operation’ of social financing costs rather than ‘reducing’ them.”

Citi also expects that this year, the reserve requirement ratio (RRR) could be cut by 50 basis points and interest rates lowered by 10 basis points, 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,” said Yu Xiangrong.

Ding Shuang’s team believes that fiscal support will remain strong this year, with a deficit rate planned at 4%. The issuance of ultra-long special bonds and local government专项债 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 proportion relative to GDP.

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

Fundamentally

Unblocking Economic Circulation

As policies shift from macro to micro, the tools to boost domestic demand are also becoming more structural.

Deutsche Bank’s Chief Economist for Greater China, Bear Yiqi, said that boosting consumption remains the primary macro policy task this year, with stimulating service consumption potential being the top priority.

Through a series of policy measures—removing supply restrictions in various service sectors, enriching and upgrading consumption scenarios, improving leave policies to increase residents’ leisure time—the consumption potential in areas like leisure, tourism, health, and elderly care is expected to be fully unleashed.

In addition, policies also send stronger signals to regulate long-standing “involution” competition among enterprises. Liu Jing noted that the government work report this year places “deepening the construction of a unified national market” at the top of reform priorities, and mentions using capacity regulation, standards, price enforcement, and quality supervision to thoroughly rectify “involution” competition.

“We believe that targeted measures aimed at regulating competition order and local government economic promotion are likely to be introduced and implemented within the year, which will help narrow PPI declines and achieve positive growth within the year. In the medium to long term, continuous regulation of supply-side competition will be an important means to ensure more efficient resource allocation and market-oriented reforms, boosting innovation vitality and industry profit margins across society, thus providing a solid foundation for high-quality economic development,” Liu Jing said.

Bear Yiqi also mentioned that “anti-involution” remains a policy focus, with possible fine-tuning of methods. Regulating local government economic incentives and subsidies is seen as key to curbing capacity expansion and “involution” competition.

Overall, the policy signals for 2026 are undoubtedly clear and pragmatic. On one hand, facing complex domestic and international environments, decision-makers have moderately lowered growth targets and maintained overall policy strength, leaving room for long-term reforms. On the other hand, whether it is the shift toward “service consumption” or the continued rectification of “involution” competition, policies are attempting to fundamentally unblock economic circulation.