China economy
Executive summary
China is targeting “around 5%” GDP growth for 2026—continuing a policy stance used in 2024–25—to counter weak domestic demand and a deflationary risk, a goal advisers say will require active fiscal and monetary easing [1]. Export strength and upgraded forecasts from institutions such as Goldman Sachs and the OECD have bolstered optimism, even as property stress, weak consumption and investment remain key downside risks [2] [3] [4].
1. Growth target: policy continuity with a purpose
Advisers and analysts tell Reuters that Beijing is likely to keep an annual growth target of about 5% for 2026, mirroring the prior years and aimed at reversing deflationary pressure; they argue this will oblige authorities to keep fiscal and monetary “spigots open” and maintain a budget stance near a 4% deficit ratio seen this year [1]. The advisers cited are not decision‑makers but their consensus view signals that policymakers want flexibility to use stimulus tools early in 2026 [1].
2. Exports: the surprising tailwind
A rebound in exports has materially changed the outlook: Goldman Sachs and other forecasters have raised China growth forecasts because goods exports have held up and gained market share, helping offset domestic weakness [2]. CNBC and other reporting highlight November export strength and note that stronger external demand makes the “around 5%” target more attainable despite faltering factory orders and an eighth month of manufacturing contraction in November [5].
3. Domestic demand: consumption and investment lag
Multiple sources highlight a central weakness: weak consumption and especially collapsing investment. CNBC and the OECD note consumption remains subdued, with investment slowing sharply through 2025, creating a core demand shortfall that policy must address if growth is to be sustained beyond short‑term external boosts [4] [6]. Trading and domestic figures show services trade and some inclusive‑finance gains, but these do not fully offset property and private investment drag [7].
4. Property sector and financial risks
The property market remains a binding constraint. Analysts and reports describe a years‑long housing bust and excess inventory that dampen consumption and investment; policymakers’ stimulus so far is aimed at stabilising markets but the correction still weighs on growth and confidence [8] [2]. UBS’s scenarios even allow for a sharper slowdown should trade frictions intensify, underlining the fragility tied to real‑estate dynamics [9].
5. Forecasts diverge: cautious upgrades and hawkish tails
Major institutions are split on the pace ahead. Goldman Sachs and the OECD have nudged 2025–2026 numbers upward—Goldman lifted its 2025 forecast to 5.0% and raised 2026 estimates, while OECD also revised its 2025 view—reflecting stronger exports and policy support [2] [3]. By contrast, UBS sketches downside scenarios where growth slows to 4.0% in 2025 and 3.0% in 2026 under a heavy tariff shock, showing sensitivity to external policy moves [9].
6. Policy toolkit: stimulus without rebalancing risks
Analysts warn Beijing’s likely response—greater fiscal support and looser monetary conditions—may lift short‑term growth but not automatically rebalance the economy toward household consumption; Bruegel and other commentators caution that stimulus can perpetuate export‑led, capacity‑heavy dynamics unless structural measures boost domestic demand [10]. Reuters reporting confirms advisers are preparing to keep both fiscal and monetary policy active to reach the target [1].
7. What to watch in 2026: five flashpoints
Reporters and newsletters point to five decisive variables: the size and timing of fiscal easing, PBoC liquidity and rate moves, property inventory destocking speed, export momentum under evolving global trade politics, and whether private investment re‑activates—each will determine whether a 5% target is sustainable or a transitory outcome [4] [2] [1].
8. Limits of current reporting and competing views
Available sources agree on headline risks and upbeat export data, but they diverge on durability: some institutions (Goldman, OECD) are upbeat about 2025–26, while UBS and policy commentators stress downside scenarios if tariffs rise or stimulus fails to restore private demand [2] [3] [9]. Available sources do not mention longer‑term structural fixes that would fully rebalance growth away from exports and property.
This synthesis draws directly on Reuters, Goldman Sachs, OECD, UBS, CNBC, Bruegel and other pieces in the provided dossier; claims above are cited to those specific reports [1] [2] [3] [9] [5] [10] [4] [7] [6].