China flags more proactive fiscal policy in 2026 to boost domestic demand

TL;DR summary:

• China signals a more proactive fiscal stance for 2026

• Policy focus shifts toward consumption, innovation and social support

• Authorities aim to reduce reliance on exports and lift domestic confidence

• Growth target around 5% likely to be retained

• Fiscal policy expected to play a central stabilising role

China’s fiscal stance is set to turn more forcefully supportive in 2026, with the government signalling a renewed push to revive domestic demand, accelerate technological innovation and strengthen the social safety net as the economy continues to grapple with weak confidence at home.

In a statement released Sunday after a two-day policy meeting, the China Ministry of Finance said fiscal policy would be “more proactive” next year, reaffirming priorities that include boosting consumption, expanding investment and nurturing new sources of growth. The messaging comes as global trading partners continue to urge Beijing to rebalance away from export-led growth and address structural weaknesses in domestic demand.

The ministry said it would actively expand investment in what it described as “new productive forces,” a phrase commonly used by policymakers to refer to advanced manufacturing, digital industries and emerging technologies. Supporting innovation and fostering new growth engines will be a core focus, alongside policies aimed at improving people’s overall development and economic resilience.

Strengthening the social security system also featured prominently in the ministry’s agenda. Authorities pledged to improve access to healthcare and education, measures seen as crucial to easing household precautionary saving and encouraging consumers to spend more freely. China’s prolonged property downturn has weighed heavily on sentiment, reinforcing the need for policies that stabilise expectations and rebuild confidence among households.

Beyond demand support, the ministry outlined broader structural goals for 2026, including deeper integration between urban and rural economies and further progress toward a greener growth model. These initiatives align with longer-term efforts to shift China’s economy toward more sustainable and balanced development, even as near-term growth pressures persist.

Earlier this month, senior leaders reiterated their commitment to a “proactive” fiscal policy designed to stimulate domestic demand while maintaining relatively strong headline growth. The latest comments from the finance ministry reinforce that message, signalling that fiscal support will remain a cornerstone of China’s macro strategy into the year ahead.

This article was written by Eamonn Sheridan at investinglive.com.