China’s Politburo (the top 24 members of the Party) met on Monday to discuss economic policies for 2026. This meeting serves as a preview of the annual Central Economic Work Conference (CEWC), which will likely convene in the next week.
The language of the Politburo meeting readout strongly suggests that the CEWC will not signal aggressive stimulus as China heads into 2026. This is consistent with our CEWC preview note (link HERE) and the expectations of mainland economists as viewed through our economic sentiment tool (link HERE).
While the meeting pledges to make domestic demand “the primary driver”, there are clear signals of a relaxed approach to growth and stimulus:
- The paragraph on macro policies is brief, stressing continuity in policy (which has been underwhelming in recent quarters) and making policy more effective (as opposed to emphasizing new measures).
- The meeting pledges to strengthen both “counter-cyclical and cross-cyclical adjustments,” with the latter phrase implying that stimulus policies should be sustainable for the long-term rather than aggressive. This contrasts with 2024’s meeting, which pledged “extraordinary counter-cyclical adjustments” and a “strong policy combination punch.” PBOC Governor Pan Gongsheng also stressed cross-cyclical policies in a recent speech on monetary policy.
- Beijing is still attuned to risks from trade tensions, but the framing implies a need for contingency planning – and perhaps saving policy room for later – rather than stimulating growth now.
- The lack of mention of property or defusing financial risks (mentioned last year) implies a hands-off approach to property, including renewed stresses stemming from a bond default by Vanke. The CEWC readout will very likely mention property as well as “anti-involution” efforts, but we expect continuation of the current policy approaches.
- There is no mention of consumption measures. While we do expect incremental steps to boost consumption, especially in services, Beijing has recognized the limits of subsidizing purchases of consumer durables.
Outlook:
The upcoming CEWC readout will provide a clearer sense of Beijing’s initial thinking on 2026 policies. However, based on the Politburo and other recent signals, we expect only modest support for domestic demand in the first half of 2026. Given strong domestic headwinds – property contraction, a soft labor market, subdued confidence – overall growth will be middling.
With its “policy pivot” of September 2024, Beijing was temporarily jolted out of a complacent approach to the economy by the threat of a US-China trade war and a collapse of domestic confidence. But the pivot was more about reducing risks than a strong pro-growth orientation, and the recent stabilization of US-China relations has allowed Beijing to lower its urgency once again. We expect modest stimulus to be necessary again in H2 2026. Triggers for a faster or more aggressive “pivot” would be signs that the 2026 growth target (likely to be 5%) is in danger, a re-escalation of US-China tensions, or signs of rising domestic social and political pressures.
For Chinese equities, the lack of near-term positive catalysts to improve the macro backdrop reaffirms our view that risks tilt to the downside.
