CEWC 2025: China Emphasizes Boosting Domestic Consumption, Proactive Fiscal Policy in 2026

At the 2025 Central Economic Work Conference in Beijing, China’s leadership set out the economic agenda for the coming year, emphasizing a proactive fiscal policy and moderately loose monetary policy, while focusing on boosting consumption and investment in key industries. For foreign companies, the agenda signals selective openings and targeted support rather than broad-based stimulus, with a more efficiency-driven policy environment that may help level the playing field and create new opportunities in priority sectors.

China has pledged to adopt a proactive fiscal policy and boost domestic consumption in the coming year as the country seeks to maintain its steady economic growth rate in 2026.

At the 2025 Central Economic Work Conference (CEWC) held in Beijing from December 10 to 11, the country’s top leadership gathered to set the economic policy agenda for the coming year, including the annual GDP growth target and budget deficit target. While many of these targets will not be publicized until the Two Sessions meetings in March of next year, the meeting readout provides a glimpse of where the country’s current policy priorities lie.

Seeking to address “old problems and new challenges” – an unpredictable foreign trade environment, a persistent disparity between domestic supply and demand, and “risks and hidden dangers” in key sectors – China will implement “more proactive and impactful macroeconomic policies” and “continuously expand domestic demand and optimize supply” in 2026.

The readout also called for local governments to exercise “fiscal discipline” and adopt a principle of austerity while ensuring investment in key projects that will have maximum impact on the economy and society.

2026 is a pivotal year for China’s economy, marking the start of the 15th Five-Year Plan period, which will run until 2030. The plan, which will be released in full next year, will provide a detailed roadmap of China’s development over the next five years, with 2026 ensuring the initial alignment of policy priorities, resource allocation, and implementation mechanisms that will shape the country’s medium-term development trajectory.

A “more proactive” fiscal policy and “moderately loose” monetary policy

China will implement “a more proactive fiscal policy” while maintaining the necessary fiscal deficit, total debt, and total expenditure in 2026, according to the CEWC readout. This focus on a “proactive” fiscal policy is a continuation of a long-standing macroeconomic agenda of counter-cyclical fiscal support.

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However, this year’s CEWC placed additional emphasis on financial discipline and called on government agencies to “adhere to the principle of austerity” as a means of addressing “local fiscal difficulties” – a reference to high levels of local government debt. The emphasis on austerity reflects statements made by the Minister of Finance Lan Fo’an in a piece published in the People’s Daily on December 2, in which he stated China will aim to be “frugal with small money and generous with big money”, emphasizing the need to “save money where possible” while spending fiscal funds wherever “policies are more effective, have a greater driving power, and are more needed by the people”.

Meanwhile, the readout outlined a “moderately loose” monetary policy, in which tools such as cuts to the reserve requirement ratio (RRR) and interest rates will be used “flexibly and efficiently,” particularly for areas including expanding domestic demand, technological innovation, and supporting SMEs.

While policymakers may hope that looser monetary policy could lead to a boost in activity and drive China’s sluggish CPI, analysis from Trivium China suggests “cheaper credit will mostly facilitate refinancing of existing debt”.

Boosting domestic demand

Top of the agenda for 2026 is boosting domestic demand, seen as key to ensuring the long-term growth and stability of China’s economy.

According to the readout, China will “adhere to domestic demand as the main driver and build a strong domestic market” by implementing a range of supply and demand-side policy initiatives. On the demand side, China will “further implement special campaigns to boost consumption, while seeking to increase the income of urban and rural residents.

Meanwhile, on the supply side, initiatives include:

• Expanding the supply of high-quality goods and services.
• Optimizing the implementation of policies related to new infrastructure and new urbanization.
• Eliminating unreasonable restrictions in the consumption sector and unleashing the potential of service consumption.

In addition to these initiatives, the government aims to boost state-led investment as a means of increasing consumption, calling for “appropriately increasing the scale of central government budgetary investment,” while also optimizing the implementation of key projects and the management of local government special bonds, continuing to leverage new policy-based financial instruments, and effectively stimulating private investment.

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China’s domestic consumption has remained stubbornly low since the COVID-19 pandemic, with low household spending pushing down consumer prices. The government, recognizing the paradox of “strong supply and weak demand” present in the economy, has long sought to boost domestic consumption, while analysts have long viewed this as key for China’s long-term economic prosperity.

To address this issue, China has relied heavily on initiatives such as consumption vouchers and subsidies for certain product categories, mostly high-value goods like home appliances and electric vehicles. Over the past year, the government has also indicated it views the problem of sluggish consumption as a supply-side issue, emphasizing the need to create new vehicles for consumption, such as high-end technology, modern services, and online channels.

As emphasized in the CEWC readout, boosting household income is also seen as key to increasing household spending. Thus far, efforts to boost incomes have generally focused on areas such as raising the minimum wage and expanding social services such as childcare and elder care, while avoiding direct cash-in-hand stimulus policies.

Developing emerging industries for innovation-driven growth

Another key priority for 2026 is to drive “innovation-driven development” and expand “new growth drivers”, indicating continued focus on investment in high-end technology and emerging industries.

China has sought to develop emerging and high-tech industries under the banner of new quality productive forces (NQPF) to unlock new growth. While the CEWC readout does not outline specific industries, previous policy documents, including the 15th Five-Year Plan proposals, have highlighted six key “future industries” to drive new economic growth: quantum technology, biomanufacturing, hydrogen energy and nuclear fusion energy, brain-computer interfaces, embodied intelligence, and 6G mobile communications.

Additionally, the CEWC readout calls for expanding “AI +” – the integration of AI into various industries such as manufacturing – and improving AI governance. It also specifies the need to improve intellectual property protection in emerging fields.

Spurring high-quality development and combating “involution”

In 2026, China will continue its focus on reducing systemic inefficiencies that are hampering economic growth. To this end, the CEWC readout promises the formulation of regulations for building a “national unified market” and rectifying “involutionary” competition.

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The national unified market, which seeks to break down local barriers, prohibit protectionist policies, and standardize regulations across the country to facilitate inter-regional trade and investment, has been a key initiative since its launch in 2021. The National Development and Reform Commission (NDRC), China’s macro-economic planner, has indicated that specific regulations for the national unified market are in the works. In September, it published an article in the party newspaper Qiushi in which it outlined structural issues hindering the implementation of the initiative, including inadequate fiscal, tax, and statistical systems, which enable local government actions that violate the unified market principle despite attempts to prohibit them.

The NDRC therefore stated it was necessary to “accelerate the research and formulation of regulations for a unified national market,” which will provide a legal basis for regulating local government behavior and defining the boundaries of administrative actions. It additionally called for accelerating the revision and formulation of relevant laws and regulations, such as the Social Credit Construction Law, the Bidding and Tendering Law, and the Government Procurement Law, which would improve the fair and standardized application of laws and regulations.

China has also sought to curb the cutthroat competition between Chinese firms that leads to the aggressive slashing of prices to the detriment of industry growth, employment, and tax revenue in the “anti-involution” campaign, through a variety of targeted efforts in specific industries, including solar panels, lithium-ion batteries, auto manufacturing, and steel.

Additionally, the CEWC readout outlines several areas of improvement for the private economy, including “improving supporting regulations and policies for the Law on Promoting the Private Economy”.

Market opening

Further market opening and liberalization are also on the agenda for 2026, with the CEWC readout highlighting further opening of the service sector and “optimizing” the scope of free trade zones. It also specifically mentions advancing the construction of the Hainan Free Trade Port (FTP). Other initiatives include:

• Encouraging and supporting service exports and actively developing digital and green trade.
• Deepening the reform of foreign investment promotion systems and mechanisms.
• Improving the overseas comprehensive service system.
• Promoting the signing of more regional and bilateral trade and investment agreements.

China has been gradually expanding market access for foreign companies, in particular in the country’s 22 FTZs, which offer a variety of relaxed regulations and lower corporate tax rates for certain industries. Recent initiatives to increase market access and improve ease of doing business include the cross-border services industry negative lists and streamlined cross-border data regulations for certain companies based in FTZs.

Among the more radical initiatives for market opening is the construction of the Hainan FTP, which on December 18, 2025, will launch as an island-wide customs zone that will see import duties removed on 74 percent of goods entering the island (re-exports to the mainland, unless substantially transformed through local processing, will be subject to top-up duties).

While there are unlikely to be drastic measures to increase market access in 2026, the government is suggesting it will continue to roll out these types of targeted measures, with potential relaxation and openings in key sectors.

Adhering to the “dual carbon” goals

While the CEWC readout does not offer any new information on the country’s plans for decarbonization and the green transition in 2026, it reiterates the country’s commitment to a series of longstanding policies and pledges. This includes adhering to the “dual carbon” goals of reaching peak carbon emissions by 2030 and net zero by 2060, and promoting a “comprehensive green transformation”. It further highlights, among other initiatives:

• Advancing energy conservation and carbon reduction upgrades in key industries.
• Accelerating the construction of a new energy system and expanding the application of green electricity.
• Strengthening the construction of the national carbon emissions trading system (ETS).
• Strengthening the construction of meteorological monitoring, forecasting, and early warning systems, improving flood control, drainage, and disaster relief infrastructure in China’s northern regions, and enhancing the country’s ability to cope with extreme weather.

2026 marks the halfway point to China’s first “dual carbon” pledge of reaching peak emissions by 2030. The country has already made significant headway across a range of metrics, in particular in renewable energy infrastructure buildout. Meanwhile, its overall emissions have remained flat or falling over the 18 months until September 2025, according to analysis from the Centre for Research on Energy and Clean Air (CREA) for Carbon Brief.

In September of this year, China presented its five-year Nationally Determined Contributions (NDCs) to the UN General Assembly, in which, for the first time, it set an absolute carbon reduction target of seven to 10 percent across the entire economy by 2035 from peak levels.

More granular targets across various sectors are likely to be introduced in 2026, making way for potentially higher compliance burdens for companies, in particular in high-emitting heavy industries. The ETS may also see further expansion to include more industries, as outlined in a policy document released earlier in the year.

Key takeaways for foreign businesses

As the first year of the 15th Five-Year Plan period, 2026 is of particular significance in China’s policy agenda. The outset of this period will be marked by significant uncertainty in the external environment, as the true longer-term impact of tariffs and the ongoing – although currently subdued – trade tensions with the US becomes clearer.

The country is also continuing to battle structural weaknesses, most notably the imbalance between domestic supply and demand, regulatory inefficiencies, and involutionary competition.

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The CEWC readout’s emphasis on “proactive fiscal policy” and greater fiscal discipline emphasizes the fact that broad economic stimulus is not on the cards for 2026; instead, policy support will be more targeted, efficiency-driven, and focused on areas aligned with long-term industrial and consumption goals.

At the same time, the government is clearly doubling down on investment as a driver of economic growth, which could provide new opportunities for foreign investors, in particular in emerging and high-tech sectors. Moderate monetary easing will make credit conditions somewhat more favorable, though it is unclear whether this will translate into broader economic stimulus.

Meanwhile, the introduction and development of regulations on the national unified market may help to level the playing field for foreign companies in areas such as local government bidding, cross-regional compliance, and participation in sectors where inconsistent local rules have previously created barriers.

Overall, while foreign companies should not expect large-scale stimulus or sweeping market-opening measures in 2026, they can anticipate incremental but meaningful improvements in regulatory consistency, targeted openings in advanced industries and services, and expanded investment opportunities tied to innovation-driven growth and domestic demand upgrading.

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