China Recognizes Imbalance, Promises Big Boost for Consumption
By Reuters | 11 Dec, 2025

Beijing pledges stimulus to boost incomes and consumption in order to secure 5% growth for 2026.

Chinese leaders promised on Thursday to maintain a "proactive" fiscal policy next year that would stimulate both consumption and investment to maintain high economic growth, which analysts expect Beijing to target at roughly 5%.

Those pledges were published in a readout by state news agency Xinhua of the annual Central Economic Work Conference held December 10–11, a key gathering of the Communist Party to set the policy agenda and targets for next year.

The prospect of forceful fiscal stimulus could ease worries over the slowdown seen in the second half of the year in almost every area of the economy that is not contributing to China's trillion-dollar trade surplus.

But the dual focus on consumption and investment cements concerns that Beijing is not yet ready to shift from a production-driven economy to one that would be driven more by household spending, even if policy documents have lately begun to mention domestic demand ahead of industrial upgrades in the list of priorities.

Economists say this decades-old imbalance in the Chinese economy threatens long-term growth for the sake of maintaining a high short-term pace by forcing the economy deeper into debt to finance investment, not all of which is productive.

"Again and again they're trying to emphasize consumption," said Max Zenglein, senior economist for the Asia-Pacific at The Conference Board research group.

"But we've seen that before," he said, adding that China's production and demand goals remain "an ongoing contradiction. And we'll have to see how that's going to be resolved in policy."

PROMISES TO BOOST INCOME AND CONSUMPTION

The meeting promised "in-depth implementation of special actions to boost consumption" and "plans to increase the income of urban and rural residents" in order to "unleash the potential for services consumption," according to Xinhua.

"The contradiction between strong domestic supply and weak demand is prominent," the readout said.

Still, the statement suggested this contrast was here to stay into 2026, as the leadership also promised to revive investment after a slump in the second half of the year - a policy path that analysts blame for directing resources towards the export-focused manufacturing sector that could otherwise be used to bolster the social safety net and the household sector.

Christopher Beddor, deputy China research director at Gavekal Dragonomics, said he expects the government to do more to support household consumption, but only in "modest" steps.

At CEWC, Beijing sets targets for economic growth, the budget deficit, debt issuance and other variables for the year ahead. The targets, however, won't be officially released until an annual parliament meeting in March. 

China is likely to stick to its current annual economic growth target of around 5% next year, government advisers and analysts said. Its budget deficit target is also expected to remain around this year's record 4% of GDP.

Liquidity injections through lower reserve requirement ratios on banks and cuts to interest rates are also on the cards next year, according to the readout, but analysts expect only incremental action from the central bank.

2026 COULD TEST CHINA'S TARIFF RESILIENCE

China's economy has shown remarkable resilience this year in the face of higher trade tariffs imposed by Washington, having diversified its export markets away from the United States even though it ultimately benefits from the U.S. role as the main source of demand in the global economy.

But the United States has also imposed tariffs on most of the world - and if that starts to disrupt global growth, China's export reliance can turn into a major weakness.

And its annual trade surplus, roughly the size of the Polish economy, is already stirring tensions with Europe and other trade partners, and drawing criticism from the International Monetary Fund and other observers who say its production-focused economic growth model is unsustainable.

"They know they cannot continue to pile up $1 trillion in trade surpluses each year without anybody complaining," said Alicia Garcia-Herrero, Asia-Pacific chief economist at Natixis. 

(Reporting by Beijing newsroom; Editing by Sharon Singleton, William Maclean and Toby Chopra)