Five Imperatives And Eight Tasks: Central Meeting Specifies Next Year’s Economic Work, Highlights Identified

The Central Economic Work Conference, convened from December 10 to 11, reviewed economic performance in 2025, assessed current conditions, and set the agenda for 2026. Building on the Politburo discussion on December 8 that identified eight priority tasks, the conference further refined policy arrangements and targets, offering concrete guidance on fiscal and monetary measures and other key policy levers.

The meeting underscored several practical conclusions drawn from recent experience: it is essential to fully mobilize latent economic potential; policy support must be advanced in tandem with reform and innovation; authorities should combine flexibility with effective governance; investment in physical capital must be closely integrated with investment in human capital; and strengthening domestic capabilities is necessary to withstand external pressures.

With 2026 marking the opening year of the 15th Five‑Year Plan, the conference called for policies that deliver qualitative improvements alongside reasonable quantitative growth to secure a strong start to the plan. International organizations, including the World Bank and the International Monetary Fund, have recently revised upward their forecasts for China’s growth next year, and many domestic institutions expect a growth target near 5 percent. The World Bank noted that China’s long‑term growth potential remains substantial and can be further enhanced through stronger technological innovation and more efficient resource allocation.

Fiscal Policy: Maintain Necessary Deficit And Prioritize Investment In People Fiscal policy will retain a more proactive orientation in the plan’s opening year, maintaining necessary levels of deficit, overall debt and total expenditure while optimizing spending composition and addressing local fiscal pressures. This year’s fiscal deficit ratio was set at 4 percent—one percentage point higher than the prior year—resulting in a deficit of RMB 5.66 trillion, the largest in recent years. Experts generally agree that next year’s deficit ratio should not fall below the current level, given the need to meet annual growth objectives, bolster medium‑ and long‑term momentum, and alleviate constraints on local government finances.

Commentators argue that sustaining a deficit ratio at or above 4 percent and allowing the debt envelope to expand modestly will be necessary to support demand through measures such as increased government bond issuance. Recent budgetary trends show a growing share of public spending directed to health, education, pensions and housing security, reflecting a clear policy tilt toward human‑capital investment. Strengthening mechanisms that link fiscal resources to people‑centered outcomes and improving systems for talent development are expected to convert demographic advantages into productivity gains, thereby creating a policy loop from investment in people to improved livelihoods, stronger consumption and higher‑quality growth.

Monetary Policy: Flexible, Efficient Tool Use And A Favorable Exchange‑Rate Backdrop Macro policy next year will emphasize a more proactive stance with stronger countercyclical and cross‑cycle adjustments, while monetary policy will remain moderately accommodative and liquidity ample. Compared with last year’s language on “timely reserve‑requirement and interest‑rate cuts,” the conference highlighted the need to “flexibly and efficiently” deploy a range of instruments. Analysts interpret this as a signal that monetary operations will prioritize effectiveness and initiative, balancing the maintenance of adequate funding conditions with the avoidance of excessive stimulus that could destabilize asset markets.

Both reserve‑requirement and interest‑rate adjustments are expected to play roles in preserving relatively loose financing conditions, and structural monetary tools will be scaled up to support priority areas such as domestic demand expansion, technological innovation and small‑and‑micro enterprises. The conference also reaffirmed the objective of keeping the renminbi “basically stable at a reasonable and balanced level,” with observers noting that the external environment for the currency in 2026 is likely to be relatively benign and that the central parity against the U.S. dollar could edge modestly to a range around 6.9–7.0.

Expanding Domestic Demand: New Anchors For Income And Investment The conference reiterated that the imbalance between robust supply and weak demand remains a central challenge, and it placed “expanding domestic demand” at the top of next year’s priorities. New policy language emphasized the formulation and implementation of an urban‑rural household income growth plan and measures to stabilize and reverse the decline in investment. Strengthening consumption and stabilizing investment are complementary objectives: the meeting called for intensified actions to boost consumption and for policies that raise household incomes, aligning with the 15th Five‑Year Plan’s emphasis on improving income distribution.

On the investment side, the conference pointed to increasing central budget investment and optimizing the implementation of major projects as core directions. Observers view these measures as part of a coordinated effort to align investment in physical infrastructure with investment in human capital, thereby mobilizing both public and private resources.

Stabilizing the Property Market: Inventory Reduction As A Priority Real estate policy was addressed within the framework of mitigating risks in key sectors, with the conference stressing the importance of stabilizing the housing market to support overall economic stability. Inventory reduction emerged as a principal policy focus, with guidance to tailor measures by city to control new supply, reduce existing stock and improve the quality of housing supply. Encouraging the market‑based acquisition of existing commercial housing for conversion to affordable housing was highlighted as an important instrument to revitalize stock, relieve liquidity pressures on some developers and optimize supply‑demand dynamics. Reform of the housing provident fund system was also identified as a priority to strengthen support for housing consumption.

Deepening Capital Market Reform And Enhancing Financing‑Investment Balance The conference called for continued and deepened reform of capital‑market financing and investment mechanisms. Building on recent reform steps, authorities will press ahead with measures to improve market institutions and functions, enhance the capital market’s capacity to serve technological innovation and the real economy, and promote balanced development between financing and investment. Planned actions include further reform of the ChiNext board, improvements in corporate governance, stronger dividend and buyback practices, and reforms to public funds and long‑term institutional investment frameworks to cultivate a “long‑money, long‑investment” ecosystem. These reforms aim to broaden market inclusiveness, increase the share of long‑term institutional holdings and strengthen market resilience.

Anchoring Innovation: Three International Science And Technology Centers To Lead New Momentum The conference specified the construction of international science and technology innovation centers in Beijing (Beijing‑Tianjin‑Hebei), Shanghai (Yangtze River Delta) and the Guangdong‑Hong Kong‑Macao Greater Bay Area as core pillars of innovation‑driven development. These centers are expected to leverage existing research strengths and strategic advantages to accelerate original innovation, enhance translational capacity and scale industrialization and globalization. Experts emphasize the need to clarify functional roles, reduce redundant investment, remove administrative barriers and establish mechanisms for cross‑regional technology transfer and benefit sharing to maximize the centers’ national impact.

Advancing Reform And Addressing Excessive Competitive Pressures Reform remains central to sustaining high‑quality development. The conference outlined plans to optimize the market environment, invigorate enterprise dynamism, deepen factor‑market and fiscal reforms, and strengthen financial support. A key legislative priority is drafting a unified national market law to provide a clearer institutional framework for curbing distortive local practices and aligning fiscal, tax and statistical systems with the requirements of a unified market. The meeting also emphasized targeted measures to reduce “involution‑style” competition, aiming to mitigate the negative externalities of excessive rivalry in specific sectors.

Expanding External Partnerships And Concluding Trade And Investment Agreements On openness, the conference reiterated the commitment to broaden cooperative win‑win arrangements and to accelerate the negotiation and signing of regional and bilateral trade and investment agreements. China will continue to defend the multilateral trading system while expanding a network of high‑standard free‑trade arrangements, including advancing RCEP implementation, promoting the China‑ASEAN Free Trade Area 3.0 upgrade, and pursuing accession to agreements such as CPTPP and DEPA. Trade data indicate that in 2024 trade with free‑trade partners accounted for 43 percent of China’s total, with exports and imports to those partners growing faster than overall trade. Authorities signaled intent to pursue pragmatic, flexible negotiations to expand high‑standard trade and investment links, including with African partners and other regions.

Overall, the conference sets a policy framework that combines proactive fiscal and monetary support, targeted structural reforms, and a renewed emphasis on innovation and domestic demand. The package aims to secure a stable start to the 15th Five‑Year Plan by strengthening short‑term stabilization measures while advancing medium‑ and long‑term structural upgrades.