China’s Strategic Fiscal and Monetary Push to Revitalize Growth in 2026

China is expected to set its 2026 GDP growth target between 4.5 % and 5 %, a signal that policymakers are balancing ambition with realism as domestic consumption falters and global demand remains tepid. Despite achieving roughly 5 % growth in 2025 and maintaining a strong trade surplus, slower domestic investment and weak consumer spending have made a slightly lower target more pragmatic, backed by readiness for monetary easing if needed. This reflects China’s shift toward quality-focused growth and resilience amid global economic uncertainties.

To support targeted industrial and infrastructure investment, China issued approximately 93.6 billion yuan (about US $13.4 billion) in ultra-long-term special treasury bonds aimed at equipment upgrades in sectors like manufacturing, energy, healthcare, and urban infrastructure. This is part of a broader funding plan expected to channel over 460 billion yuan into priority areas in 2026, representing a more proactive fiscal stance to stimulate domestic demand. Such bond issuances help unlock financing for projects that can spur technological adoption and strengthen economic foundations.

Despite these policy efforts, China’s lending footprint abroad has shifted noticeably: Chinese lending to African countries nearly halved in 2024 to around US $2.1 billion, marking the first annual decline in years and reflecting tighter global credit conditions and risk rebalancing toward yuan-denominated financing. This shift underscores how Beijing and its policy banks are recalibrating overseas lending amid repricing of risk and changing global demand, especially in traditional infrastructure financing markets.

Meanwhile, China continues to court foreign capital and strengthen bilateral economic relations. Beijing publicly expressed strong willingness to expand economic ties with the United Kingdom, including plans to revitalize a business CEO council and increase bilateral investment dialogue. Such diplomatic economic engagement aims to bolster foreign direct investment (FDI) and reassure global business confidence as geopolitical tensions complicate international capital flows.

Domestically, rural banks are confronting rising levels of distressed assets as they struggle to sell seized properties despite steep discounts, partly due to subdued property markets and persistent weak home prices. This development highlights underlying credit stress in smaller financial institutions and suggests that broader financial stability may hinge on effective asset management and deeper policy support for credit markets.

Collectively, China’s evolving policy mix of fiscal stimulus, accommodative monetary tools, and strategic international engagement outlines a calibrated response to structural weaknesses. It aims to stabilize the economy, strengthen growth engines beyond exports, manage banking sector risks, and maintain attractiveness to global investors.