UBS: NPC Takeaways: Lower Growth Target, More Modest Support, More Rebalancing
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UBS analyzes the key takeaways from the 2026 National People Congress, highlighting a strategic shift toward modest policy support and economic rebalancing. The government has set a conservative GDP growth target of 4.5 to 5 percent, slightly below the 2025 goal. The consumer price index inflation target remains at 2 percent, though UBS views this as non-binding and forecasts actual CPI inflation of just 0.4 percent.
Fiscal policy support is intentionally measured. The general public budget deficit ratio holds steady at 4 percent, while issuance quotas for ultra-long special treasury bonds and local government special bonds remain unchanged from 2025. UBS expects the augmented fiscal deficit to expand by approximately 0.5 percentage points in 2026, a slower pace compared to the 1 to 1.5 percentage point expansion seen last year.
Monetary policy will remain accommodative. UBS anticipates policy rate cuts of 10 to 20 basis points and reserve requirement ratio reductions of 25 to 50 basis points. Consumption is a stated priority, yet actual support is restrained. Trade-in subsidies were reduced from 300 billion to 250 billion yuan, supplemented by a new 100 billion yuan consumer loan fund.
The policy agenda strongly emphasizes innovation and decarbonization. Research and development spending is targeted to grow beyond a 7 percent compound annual growth rate, while carbon intensity is slated to decrease by 3.8 percent in 2026. UBS maintains its baseline 2026 GDP growth forecast at 4.5 percent but notes that upside risks currently dominate.