Balanced growth, structural reforms in focus for 2026

Under a "more proactive" policy stance, Wen Bin, chief economist at China Minsheng Bank, expects the scale of new government debt issuance in 2026 to further increase to around 12.5 trillion yuan ($1.8 trillion). This would help sustain broad fiscal spending and ensure basic livelihoods, salaries and normal operations at the grassroots level.

Economists at China Minsheng Bank estimate that the deficit ratio will remain at around 4 percent in 2026, corresponding to a deficit of roughly 5.9 trillion yuan — an increase of about 200 billion yuan from the previous year.

Issuance of ultra-long special treasury bonds is projected to reach 1.8 trillion yuan, up 500 billion yuan year-on-year. Local governments are expected to issue 4.8 trillion yuan in special-purpose bonds, an increase of 400 billion yuan from the previous year, Wen said.

Moreover, fiscal expenditure will likely be optimized to address local fiscal difficulties and basic spending needs, support social welfare and the social safety net, while tax incentives and fiscal subsidies may be normalized, said Zhang of UBS.

The meeting also noted that China will continue implementing a moderately accommodative monetary policy and will flexibly and efficiently employ various tools such as reserve-requirement-ratio and interest-rate adjustments to maintain ample liquidity.

Wang Yunjin, chief financial researcher at the Guangkai Chief Industry Research Institute, said China's central bank will make its open-market operations — including the medium-term lending facility, reverse repos and government bond purchases and sales — more flexible, targeted and efficient. These measures will continue to keep market liquidity ample and meet a wide range of funding needs.

On interest-rate policy, Wang noted that although domestic rates have already fallen to historic lows, there is still room and a need for further reductions. Taking into account the pressure on lenders' net interest margins, the central bank may cut policy rates by 0.1 to 0.3 percentage point next year, he said.

UBS economists maintain their baseline forecast of China's central bank cutting the policy rate by 20 basis points and reducing the reserve requirement ratio by 25-50 basis points by the end of 2026.