UOB’s Ho Woei Chen expects the National People’s Congress to set a target real GDP growth rate of 4.5% to 5.0% for 2026, with an actual growth forecast of 4.7%. The report highlighted a likely CPI target of 2%, a budget deficit close to 4% of GDP, more specialized local governments and ultra-long-term government bonds, and moderate monetary easing through a 10 basis point interest rate cut and a 50 basis point RRR cut.

NPCs 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 targets compared to ~5% targets over the past three years. Of the 31 regions, 21 lowered their growth targets compared to 2025. Guangdong – China’s largest province and most important manufacturing center – recorded 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% over the past two years. Despite our expectation of slower real GDP growth, nominal growth may pick up as deflation subsides.”

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

“Continuing to implement a “more proactive fiscal policy” and a “moderately loose monetary policy.” The budget deficit target is likely to remain around 4% of GDP in 2026, while the amount of local government special bonds may be further increased from a record high of CNY 4.4 trillion in 2025 to increase support for local infrastructure construction. In addition, China may increase the issuance of its ultra-long-term special government bonds this year – we expect about CNY 1.5 trillion from CNY 1.3 trillion in 2025.”

“In terms of monetary policy, our fundamental assumption remains a 10 basis point cut in policy rates and a 50 basis point cut in the reserve requirement ratio (RRR) this year, as in 2025. This is likely to occur in the first half of 2026.”

(This article was created with the assist of an artificial intelligence tool and has been reviewed by an editor.)