Policy mix guides 2026 growth path – UOB

UOB‘s Ho Woei Chen expects China’s National Peoples Congress to set a 2026 real GDP growth target of 4.5–5.0%, with actual growth forecast at 4.7%. The report highlights a likely 2% CPI target, a fiscal deficit near 4% of GDP, more special local government and ultra-long-term treasury bonds, and modest monetary easing via a 10-bps rate cut and 50-bps RRR reduction.

NPC to balance growth and stability

“We expect the NPC to set a more moderate real GDP target of 4.5–5.0% for 2026, reflecting lower provincial goals, vs. ~5% targets in the past three years. Of the 31 regions, 21 lowered their growth targets compared with 2025. Guangdong – China‘s largest province and premier manufacturing hub – has set a growth of 4.5-5.0% compared to ~5% in 2025. We forecast China’s real GDP growth to slow to 4.7% in 2026 from 5.0% in the last two years. Despite our expectation for slower real GDP growth, nominal growth may pick up as deflation eases.”

“Last year, China set the CPI target below 3% for the first time since 2004. We expect the CPI target to remain at around 2% for 2026. The actual inflation outturn has been consistently below the official target in recent years with the deviation more pronounced in the last three years. We expect the CPI inflation to rebound to 0.9% in 2026 from 0% in 2025 and the PPI to turn around to +0.2% after declining in the past three years (2025: -2.6%).”

“Continue implementing ”a more proactive fiscal policy“ and ”a moderately loose monetary policy“. Fiscal deficit target is likely to be maintained at around 4% of GDP in 2026 while the quota of special local government bonds may be raised further from its record high of CNY4.4 tn in 2025 to boost support to the local infrastructure building. In addition, China may increase the issuance of its ultra-long-term special treasury bonds this year – we expect around CNY1.5 tn from CNY1.3 tn in 2025.”

“For the monetary policy, our base case assumption remains for a 10-bps policy rate reduction, and a 50-bps reserve requirement ratio (RRR) cut this year, similar to 2025. This is likely to be frontloaded in 1H26.”