China’s finance ministry said on Sunday that fiscal policy will become more proactive in 2026, reinforcing Beijing’s commitment to boosting domestic demand, accelerating technological innovation, and strengthening the country’s social safety net as it confronts slowing momentum at home and rising pressure from trading partners.
The policy signal followed a two-day meeting where fiscal authorities outlined economic priorities for next year, against the backdrop of a prolonged property downturn that has weighed heavily on household confidence, local government finances, and broader economic sentiment.
In a statement released after the meeting, the ministry said China would step up efforts to expand consumption and actively increase investment in what it described as “new productive forces,” a phrase often used by policymakers to refer to advanced manufacturing, high-end technology, green industries, and digital innovation.
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“China will boost consumption and actively expand investment in new productive forces and people’s overall development,” the ministry said, pointing to a shift toward demand-side support after years of export-led growth.
The renewed emphasis on domestic demand comes as major trading partners continue to urge Beijing to reduce its reliance on exports, warning that China’s manufacturing overcapacity risks distorting global trade flows. Those calls have intensified as weak domestic demand has pushed Chinese firms to lean more heavily on overseas markets, even as geopolitical tensions and trade barriers rise.
At home, the drag from the property sector remains a central concern. The multi-year real estate crisis has eroded household wealth, dampened consumer spending, and strained local government finances that depend heavily on land sales. The ripple effects have contributed to subdued inflation and, in some sectors, outright deflation, reinforcing the urgency for stronger fiscal intervention.
Beyond consumption, the finance ministry said fiscal policy in 2026 would prioritize innovation as a means of cultivating new growth engines. Support for research, advanced manufacturing, and strategic technologies is expected to remain central to Beijing’s long-term plan to move the economy up the value chain and reduce dependence on foreign technology.
The ministry also pledged further improvements to the social security system, with a focus on expanding access to healthcare and education. Analysts see this as a key lever for encouraging household spending, as stronger social protections could reduce precautionary savings and free up income for consumption.
Other policy priorities outlined for next year include promoting deeper integration between urban and rural areas, a long-standing goal aimed at narrowing income gaps and unlocking rural consumption, as well as accelerating China’s transition to a greener economy through environmental and energy-related investments.
Despite mounting headwinds, China is expected to maintain its annual growth target of around 5 percent in 2026, according to government advisers and analysts cited by Reuters. Achieving that goal, however, would likely require authorities to keep both fiscal and monetary support in place as they attempt to break the economy out of its deflationary spell.
Earlier this month, China’s top leaders reiterated their commitment to a “proactive” fiscal stance in 2026, signaling readiness to use government spending and targeted stimulus to stabilize growth. That language suggests continued issuance of government bonds, support for infrastructure and strategic sectors, and policies aimed at reviving consumer confidence.
The challenge for policymakers will be balancing short-term stimulus with longer-term structural reforms, particularly as debt levels remain elevated and external demand becomes more uncertain. Currently, the finance ministry’s message points to a clear priority of reigniting domestic demand and restoring confidence as China seeks to sustain growth in an increasingly complex global environment.