China’s Economic Outlook: Macro and Fiscal Policy Analysis

China is adjusting its macroeconomic framework for 2026 as it transitions toward the 15th Five-Year Plan period, focusing on a strategic pivot from investment-heavy growth to a consumption-led model. This shift comes as the government balances the need for domestic demand recovery against a projected slowdown in global GDP growth and ongoing trade uncertainties.

According to the Bank of China Research Institute in a report dated October 15, 2025, the Chinese economy maintained general stability throughout 2025, with GDP growth projected at approximately 5% for the full year. The first half of 2025 saw a growth rate of around 5.4%, supported by proactive counter-cyclical adjustment policies and industrial production growth.

2025 Fiscal Performance and Demand Shifts

The International Monetary Fund reported on February 18, 2026, that China adopted a more expansionary fiscal policy stance during 2025. This approach included the implementation of targeted social subsidies and a concerted effort to reduce over-investment in specific sectors to facilitate a pivot toward consumption-led growth.

Trade performance in 2025 exhibited mixed results. The Bank of China Research Institute noted that in the first five months of 2025, total exports increased by 6% year-on-year to USD 1.48 trillion. However, this growth masked a significant decline in trade with the United States, where exports dropped by 7.4% year-on-year during the same five-month period.

To sustain momentum, the Bank of China Research Institute indicated that domestic demand became a larger contributor to economic growth in the second half of 2025, with GDP growth projected at around 5% for the third quarter of that year.

Projections for 2026 Fiscal and Monetary Policy

Looking toward 2026, international financial institutions anticipate a more calibrated approach to fiscal management. In a China Economic Update published December 5, 2025, the World Bank projected that authorities would pursue a somewhat narrower fiscal deficit in 2026.

The World Bank’s projections for 2026 also assume the continuation of a moderately accommodative monetary policy as the government balances economic stabilization with fiscal discipline.

These domestic adjustments occur against a challenging global backdrop. The OECD Economic Outlook (Volume 2025 Issue 2) projected that global GDP growth would slow in 2026. While the OECD noted that rising AI-enabling investment and trade have helped underpin global demand, it highlighted that elevated policy uncertainty and rising trade barriers continue to create headwinds.

Strategic Goals and the 15th Five-Year Plan

The current macroeconomic trajectory is designed to lay the foundation for the 15th Five-Year Plan. The Bank of China Research Institute emphasized the necessity of enhancing the intensity and effectiveness of macro policies to achieve several core objectives:

• Driving the recovery of domestic demand to reduce reliance on external markets.
• Stabilizing the real estate market to mitigate systemic financial risks.
• Creating internal certainties to offset external uncertainties, specifically highly uncertain US tariff policies that are expected to weigh on export growth.

The shift toward growing internal certainties is central to the government’s strategy to ensure steady economic growth and a successful start to the next five-year planning cycle.

The broader discourse among economists, including figures such as Gao Peiyong, Wang Yiming, and Huang Yiping, as noted by the Securities Times, continues to focus on how to strengthen these macro policies and the specific arrangements for the 2026 fiscal budget to support industrial upgrading and economic recovery.