Morgan Stanley: NPC Preview – Policy Continuity, Not a Pivot
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Morgan Stanley anticipates the upcoming National People's Congress (NPC) will emphasize policy continuity rather than a macroeconomic pivot. The firm expects authorities to maintain the 2026 GDP growth target at approximately 5% to anchor market confidence during the first year of the 15th Five-Year Plan. Fiscal policy will focus on buffering rather than stimulating, with the initial budget scale holding steady at 11.6% of GDP. Should growth momentum falter, an additional mid-year expenditure of 0.5% of GDP may be deployed.
The report forecasts a consumer stimulus package ranging from RMB 500 billion to RMB 600 billion. This will likely include consumer trade-in subsidies, fertility support, preschool education funding, and broader social welfare enhancements. Adjustments to service consumption may be delayed until the second half of the year. Additionally, pilot mortgage subsidy programs could launch in select cities following the NPC.
Morgan Stanley notes the reflation process remains sluggish, with weak per-capita spending during the Lunar New Year and upstream-driven PPI recovery. The RMB has accelerated its appreciation against the USD, though the trade-weighted basket remains stable amid ongoing deflationary pressures. Meanwhile, Hong Kong's GDP growth forecast is upgraded above trend, with residential property prices expected to rise another 10% in 2026, despite structural challenges in the retail sector.