Fiscal Overview - The net financing of government debt in 2026 is projected to be CNY 11.89 trillion, an increase of CNY 300 billion from 2025, while its proportion to GDP is expected to decrease from 8.5% to 8.1%[13] - The overall budget expenditure growth rate is set at 4.8%, with actual spending growth likely to exceed 5% after excluding debt repayment and bank injections[13] Expenditure Structure - The general public budget expenditure is expected to grow by 4.4% in 2026, an increase of 3.4 percentage points from 2025, with significant increases in science and technology (7.1%), foreign defense (7.0%), and social security and employment (6.0%)[2] - New special bonds will focus on major project support, indicating a stronger emphasis on infrastructure and development projects compared to 2025[2] Policy Direction - The core directive of the 2026 fiscal policy remains on expanding domestic demand, shifting from simple funding to a collaborative fiscal-financial model[18] - A total of CNY 250 billion is allocated for the "old-for-new" policy to stabilize consumer spending, while CNY 8 trillion in new policy financial tools will be introduced to leverage social capital[18] Revenue Challenges - Land use rights revenue is projected to decline by 52.3% from its peak in 2021, significantly impacting fiscal stability[3] - The overall tax burden in China ranks 36th among 38 major economies, indicating a need for structural reform to enhance revenue stability[3] Reform Initiatives - The government plans to increase the proportion of state capital revenue contributions, with state capital operating budget revenue growing by CNY 175.5 billion in 2025[4] - The introduction of zero-based budgeting and the reduction of "three public" expenditures by over 7% are key measures to improve fiscal efficiency[4]

1. Report Industry Investment Rating - Not provided in the document 2. Core Viewpoints of the Report - Policy - based financial instruments have significant "quasi - fiscal" attributes, can leverage more private capital, and improve investment efficiency. It is expected that the scale of new policy - based financial instruments in 2026 will remain high, continuing the orientation of "precise support, efficient investment, and structural optimization" [4][9]. - As the minimum capital ratio of projects is structurally reduced, the theoretical leverage multiple of policy - based financial instruments increases. However, in practice, the leverage multiple may be overestimated [4][10]. - The focus of policy - based financial instruments has gradually shifted from traditional infrastructure construction to scientific and technological innovation and consumption fields, and they are more inclined to economically large provinces. The new policy - based financial instruments have a more obvious effect on leveraging private investment compared with the previous two rounds [9][49]. 3. Summary by Relevant Catalogs 3.1 Policy - based Financial Instrument Definition - Policy - based financial instruments are established by three policy - based and development financial institutions with the support of the central bank. Their funds come from low - cost PSL provided by the central bank and financial bonds issued by policy banks, with central fiscal interest subsidies. They are mainly used to supplement the capital of major projects and have "quasi - fiscal" attributes [18]. 3.2 Project Capital System - Since 1996, a capital system has been implemented for various operating investment projects. The proportion of project capital in the total investment is determined according to different industries and project economic benefits. Adjusting the project capital ratio is an important means to regulate investment growth and optimize the industrial structure [20][21]. 3.3 Three Large - scale Launches of Policy - based Financial Instruments in History - **2015 Special Construction Fund**: To expand investment and stabilize growth, a total of about 2 trillion yuan was invested from 2015 - 2017. It was mainly used to support key projects in five major categories, and there was a time lag of about 6 - 7 months from capital investment to the formation of physical work [25][26]. - **2022 Policy - based and Development Financial Instruments**: To actively expand effective investment, a total of 7399 billion yuan was invested. It focused on three types of projects, and the time lag for project implementation was significantly reduced compared with the special construction fund [29][32]. - **2025 New Policy - based Financial Instruments**: In April 2025, it was proposed to support scientific and technological innovation, expand consumption, and stabilize foreign trade. A total of 5000 billion yuan was invested, mainly in fields such as the digital economy, artificial intelligence, and consumption. In 2026, it is expected to continue the policy orientation of "precise support, efficient investment, and structural optimization" [34][36]. 3.4 Policy - based Financial Instrument Investment Modes - The investment modes include equity investment, shareholder loans, and bridging for special bond project capital. Shareholder loans and special bond capital bridging modes involve the investment entity having creditor's rights over the project, with relatively lower risks compared to equity investment. Policy banks may choose shareholder loans more often for risk - prevention reasons [8][45]. 3.5 Policy - based Financial Instrument Investment Trends - **Investment Rhythm**: It generally takes less than one month from the establishment of the corresponding fund company of the policy bank to the completion of the first - batch investment [48]. - **Investment Fields**: The focus has gradually shifted from traditional infrastructure construction to scientific and technological innovation and consumption fields [49]. - **Investment Regions**: Economically large provinces generally receive higher investment amounts [59]. - **Effect on Loan Demand**: The investment of policy - based financial instruments has effectively driven the recovery of overall loan demand, and the new policy - based financial instruments have a more obvious effect on leveraging private investment [56]. 3.6 Policy - based Financial Instrument Investment Amounts in Each Province - Economically large provinces generally receive higher investment amounts of policy - based and development financial instruments and new policy - based financial instruments, which is speculated to be due to more major project reserves and greater capital requirements in these provinces [59]. 3.7 Leverage Multiple Calculation - The investment of policy - based financial instruments can supplement project capital, enhance project financing capabilities, and accelerate project implementation. The participation of social capital and bank credit is the "leveraged" part. As the minimum capital ratio of projects is structurally reduced, the overall leverage multiple increases. However, in practice, the leverage multiple is lower because the capital ratio of most infrastructure projects is significantly higher than the legal minimum. The leverage multiple is also likely to be overestimated in practice [10][65]. - **2015 Special Construction Fund**: The theoretical leverage multiple is 4, and the actual leverage multiple of the National Development Bank is about 3.4 [68]. - **2022 Policy - based and Development Financial Instruments**: The theoretical leverage multiple is 10. The actual leverage multiples of the Agricultural Development Bank and the Export - Import Bank are about 12.2 and 14.6 respectively, and the credit leverage multiple is about 4.7 [69]. - **2025 New Policy - based Financial Instruments**: The overall leverage multiple is about 14, and the leverage multiples of different policy banks and projects vary [70]. - **Provincial and Project - level Leverage Multiples**: In 2022, the provincial leverage multiples were about 7 - 14 times; in 2025, the provincial leverage coefficients were 6 - 27 times, and the project - level leverage multiples were 7 - 22 times, mostly concentrated around 10 times [72][76].

Economic Outlook - China's economy shows strong resilience despite increasing internal and external uncertainties, with challenges such as geopolitical risks and weak global economic momentum[3] - The GDP growth target for 2026 is set at 4.5%-5%, which aligns with the long-term goal of achieving an average annual growth rate of 4.17% from 2026 to 2035[4][15] Inflation and Employment - The Consumer Price Index (CPI) target for 2026 is approximately 2%, indicating a more optimistic outlook for price stabilization and a gradual recovery in consumer prices[4][18] - The urban survey unemployment rate target remains around 5.5%, reflecting a commitment to employment stability[15][19] Fiscal Policy - The broad fiscal deficit is projected at approximately 11.89 trillion yuan, with a deficit rate of about 8.1%, maintaining a relatively active fiscal stance[5][26] - Special bonds are allocated at 4.4 trillion yuan, with an additional 1.3 trillion yuan for ultra-long-term special bonds, indicating a focus on major projects and debt replacement[5][26] Monetary Policy - Monetary policy is expected to remain "appropriately accommodative," with potential room for a 50-100 basis point reduction in reserve requirements and a 10 basis point interest rate cut[6][30] - The report emphasizes the need for flexible use of various monetary policy tools to support domestic demand and innovation[6][30] Investment and Consumption - Strategies to stimulate consumption include increasing income, promoting new consumption scenarios, and enhancing service consumption, with a focus on cultural tourism and wellness[6][32] - Investment will target new productivity, urbanization, and human development, with a budget of 7.55 billion yuan and 8 billion yuan in policy financial tools to leverage more social capital[6][33] Innovation and Industry - The report highlights the importance of fostering new industries and future sectors, including integrated circuits, aerospace, and biotechnology, with a focus on enhancing the role of private enterprises in innovation[6][35] - Emphasis is placed on the application of AI and the development of smart economies, with significant investments in infrastructure and technology upgrades[6][36] Reforms and Market Development - The report prioritizes the establishment of a unified market and the implementation of anti-involution policies to regulate local government incentives and subsidies[7][39] - Rural economic development and urban-rural integration are expected to benefit lower-tier cities and enhance consumer upgrades[7][40] Real Estate and Social Stability - The approach to stabilizing the real estate market is characterized by moderate measures, focusing on quality rather than quantity in urban renewal projects[7][41] - Multiple initiatives are proposed to ensure social stability and safeguard livelihoods, including employment support and enhanced social services for vulnerable populations[7][42] Governance and Performance - The report stresses the importance of establishing a correct view of performance, emphasizing practical and realistic growth without engaging in superficial achievements[8][43] - There are risks associated with economic growth not meeting expectations and potential shortcomings in policy implementation[8][45]

Core Viewpoint - The government work report emphasizes high-quality development and sustainable growth, balancing long-term goals with short-term necessities, while maintaining a flexible and proactive monetary and fiscal policy [4][17]. Macro: Greater Emphasis on Sustainability - The report highlights the need to reform economic cycles to enhance internal growth momentum, setting a GDP growth target of 4.5%-5% for 2026, which reflects a pragmatic approach to economic management [5][17]. - Monetary policy remains flexible, with expectations of potential interest rate cuts and reserve requirement ratio reductions to support economic stability [6][31]. - Fiscal policy is expected to maintain a similar scale to the previous year, with a slight increase in new debt issuance, focusing on structural adjustments and supporting consumption and investment [6][27]. Consumption and Investment - The report stresses the importance of stimulating domestic consumption through structural policies and temporary measures, including a 2,500 billion yuan special bond for consumer goods and a 1,000 billion yuan fund to promote domestic demand [9][18]. - It aims to enhance residents' income and improve the employment-friendly nature of the industrial structure, with specific measures to support low-income groups and improve social security [9][18]. Industry Policy and Technological Innovation - The report prioritizes the cultivation of new economic drivers and high-level technological self-reliance, with a focus on sectors like integrated circuits, aerospace, and biomedicine [10][18]. - It emphasizes the need for innovation and the commercialization of technological achievements, aiming to leverage China's large market and complete industrial system to enhance efficiency and drive economic growth [11][18]. Financial Sector Insights - The report indicates a continued focus on stabilizing growth and expanding domestic demand through fiscal injections into banks and new policy financial tools, which are expected to support credit demand [30][34]. - The issuance of special bonds to support state-owned banks is anticipated to enhance their capital and ability to support the real economy [32][34]. Real Estate Market Focus - The report reiterates the importance of addressing real estate supply issues, emphasizing inventory reduction and quality supply, which is crucial for stabilizing housing prices [38][39]. - It highlights the need for reforms in housing provident funds and improving the supply of affordable housing, aiming to create a more sustainable real estate market [38][39]. Energy and Environmental Policies - The report outlines goals for energy security and carbon reduction, aiming to enhance energy production capacity and promote green development [24][42]. - It emphasizes the importance of developing a new energy system and advancing low-carbon technologies, with specific targets for carbon emissions reduction [46][47].

Economic Goals - The GDP growth target for 2026 is set at 4.5%-5%, a decrease from the 5% target in 2025[3] - The weighted average GDP growth target for local governments in 2026 is approximately 5.10%, down from 5.37% in 2025[3] - The urban surveyed unemployment rate target for 2026 is around 5.5%[3] Fiscal Policy - The fiscal deficit rate for 2026 is planned at around 4%, consistent with 2025, amounting to approximately 5.89 trillion yuan, an increase of 230 billion yuan from 2025[3] - General public budget expenditure is expected to reach 30 trillion yuan for the first time, an increase of about 1.27 trillion yuan from the previous year[3] Monetary Policy - The monetary policy remains "moderately loose," with expectations for potential interest rate cuts in the second half of 2026, estimated at 25 basis points for reserve requirement ratio and 10 basis points for interest rates[5] - The issuance of new policy financial instruments is set at 800 billion yuan to stimulate investment[5] Consumption and Investment - A special fund of 1 trillion yuan will be established to promote domestic demand, alongside 2.5 trillion yuan in special bonds for consumer goods replacement[6] - Central budget investment for 2026 is planned at 755 billion yuan, an increase of 20 billion yuan from 2025[6] Green Energy and Innovation - The report emphasizes the development of future industries such as future energy and brain-computer interfaces, with hydrogen production capacity expected to exceed 5 million tons per year by the end of 2024[7] - A national low-carbon transition fund will be established to support green transformation efforts[9]

GDP Targets - Guangdong Province sets a GDP growth target range of 4.5%-5.5%, marking the first time in seven years for a range target[2] - The weighted GDP growth target for 29 provinces is estimated at 5.0%, down from 5.24% last year[2][10] - Beijing and Xinjiang have re-established annual GDP growth targets in range form, with Beijing at 4.5%-5% and Xinjiang at 5.5%-6%[3][18] Investment Trends - Major projects in six economic provinces show a combined growth rate of -0.7%, down from +3% last year[23] - Non-economic provinces like Fujian and Shanghai have a combined growth rate of -8.1% for major projects, compared to +11.1% last year[23] - Investment focus is shifting towards livelihood projects and new infrastructure, particularly in computing power and urban renewal[4][33] Consumption and Industry - There is an increased focus on service consumption, including cultural tourism, events, and new consumption trends[4][8] - At least 27 out of 29 provinces have made deployments related to AI, indicating a heightened emphasis on AI+ initiatives[4][8] Ecological and Reform Initiatives - Ecological targets have shifted from energy consumption constraints to carbon emission restrictions, focusing on electricity applications[5] - Multiple provinces have expressed commitment to integrating into a unified national market, indicating a reform trend[6]

Group 1 - The central bank of China is expected to continue implementing a loose monetary policy to eliminate negative output gaps and promote reasonable price recovery, with expectations of further rate cuts and reserve requirement ratio reductions in 2026 [2][3] - The current economic environment shows that while liquidity is not lacking, there is a deficiency in loan demand, making the necessity for interest rate cuts higher than for reserve requirement reductions [3][4] - The Consumer Price Index (CPI) for 2025 is projected to remain flat compared to 2024, significantly below the target inflation rate of around 2%, indicating that the current economic growth rate is below its potential level [2][3] Group 2 - The effectiveness of monetary policy is influenced by the economic cycle, with expansionary fiscal policy often proving more effective during economic downturns, as it can directly create new demand [4][5] - The transmission efficiency of monetary policy is also affected by the balance sheets of households and enterprises; if these are damaged, the effectiveness of expansionary monetary policy declines [5][6] - The quality of collateral available to commercial banks is crucial for credit availability; a decline in real estate prices has negatively impacted the quality of collateral, leading to reduced credit growth [6][7] Group 3 - To enhance the effectiveness of monetary policy, it is recommended to strengthen the coordination between fiscal and monetary policies, with a focus on more active fiscal measures to stimulate domestic demand [7][8] - Efforts should be made to stabilize the real estate market, as falling property prices are a significant factor affecting the balance sheets of households and enterprises [7][8] - The central government should increase the issuance of government bonds of various maturities to provide funding for expansionary fiscal policies and to supplement the quality of collateral in the banking system [8][9]

Core Viewpoint - The Gansu Branch of the China Development Bank has been actively integrating financial services into the development blueprint of Gansu, focusing on infrastructure investment to support high-quality economic growth in the region [1] Group 1: Traditional Infrastructure Investment - The construction of three new highway corridors across Gansu is a key project aimed at improving transportation and supporting urban-rural development, with the bank providing comprehensive financial services [2] - As of early December, 28 sub-projects of the new highway corridors have commenced, with the bank having invested nearly 100 billion yuan in infrastructure during the 14th Five-Year Plan period [2] - The bank has supported the construction of over 2,200 kilometers of new highways and railways, and facilitated a green energy transition with renewable energy installations exceeding 35 million kilowatts [2][3] Group 2: Financing and Project Support - The bank has developed a differentiated credit product system covering the entire project lifecycle for major infrastructure projects, including the three new highway corridors and the expansion of Lanzhou Zhongchuan International Airport [3] - During the 14th Five-Year Plan, the bank has led the organization of syndicated loans exceeding 120 billion yuan, effectively gathering financial resources for project implementation [3] - The bank has utilized policy financial tools to invest over 13 billion yuan, effectively supplementing project capital and stimulating larger-scale social investments [3] Group 3: New Infrastructure Development - The Gansu Branch has recognized the importance of new infrastructure, aligning with national strategies to modernize transportation systems and support digital economy initiatives [4] - The bank has issued over 8 billion yuan in loans to support the development of 5G, big data centers, and industrial internet projects, facilitating a transition from physical to smart connectivity [4] - A notable project includes the first "5G+" smart highway in Gansu, supported by a 6.5 billion yuan long-term loan, which enables automated driving through intelligent roadside systems [4] Group 4: Innovative Projects and Green Energy - The bank is supporting the construction of the first national pilot project for a green electricity aggregation data center in Qingyang, which aims to achieve a green electricity ratio of 55% and reduce electricity costs [5][6] - The bank's financing has also enabled the establishment of an intelligent copper factory, enhancing production efficiency and safety through automation and digital integration [6] - The ongoing development of a comprehensive and efficient infrastructure network in Gansu is expected to significantly boost the flow of people, goods, and information, contributing to the region's economic growth [6]

Core Insights - The Central Economic Work Conference held on December 10-11, 2025, outlined the economic work for 2026, emphasizing a more proactive fiscal policy and moderately loose monetary policy to stabilize the economy and promote high-quality development [1][3][5] Group 1: Economic Signals - The conference released three major positive signals: strong policy continuity with a focus on "more proactive fiscal policy + moderately loose monetary policy," emphasis on high-quality development, and targeted efforts in key areas such as domestic demand and risk prevention [3][4] - The focus on "domestic demand as the primary driver" highlights the commitment to building a robust domestic market, with specific measures to increase income for urban and rural residents [3][10] Group 2: Policy Framework - The macro policy framework for 2026 includes maintaining a fiscal deficit rate around 4% and expanding special bond quotas to approximately 5 trillion yuan, alongside a "small step, slow run" approach to monetary policy [7][8] - The expectation for fiscal policy is to direct funds towards key areas such as technology innovation, green initiatives, and consumer sectors, while monetary policy aims to lower financing costs for the real economy [8][9] Group 3: Focus on Domestic Demand - "Expanding domestic demand" is positioned as the top priority for 2026, with a focus on consumption driven by income growth and improved public services [10][20] - The strategy emphasizes a collaborative effort across government, businesses, and individuals to stimulate consumption and create a strong domestic market [10][21] Group 4: Innovation and New Growth Drivers - The conference identified key areas for new growth drivers, including digital economy, artificial intelligence, advanced manufacturing, and renewable energy, with the capital market playing a crucial role in supporting these sectors [13][14] - Capital markets are expected to provide pricing, financing, and merger support to foster innovation and facilitate the transition to high-tech industries [13][14] Group 5: Risk Management and Competition - The need to address "involution" in competition and improve the quality of small financial institutions was highlighted, with a focus on creating a unified national market to enhance fair competition [15][16] - Strategies for risk management include targeted measures to address risks in real estate and local government debt, emphasizing a market-oriented approach combined with policy support [17][18] Group 6: International Cooperation and Investment Opportunities - The conference emphasized the importance of international cooperation in areas such as digital trade, green energy, and high-end manufacturing, which are expected to present significant investment opportunities [19][20] - Investment opportunities are anticipated in sectors benefiting from service industry expansion, digital trade, and green transition, particularly for companies with competitive advantages in these areas [20][21]

Core Insights - The Central Economic Work Conference emphasizes a more proactive fiscal policy and moderately loose monetary policy for 2026, aiming to stabilize the economy and promote high-quality development [3][8][11] Group 1: Economic Signals - The conference released three positive signals: strong policy continuity, focus on high-quality development, and targeted efforts in key areas such as domestic demand and risk prevention [3][4] - Emphasis on "internal demand as the main driver" and the establishment of a strong domestic market as a top priority for 2026 [11][12] Group 2: Policy Framework - The fiscal policy is expected to maintain a deficit ratio around 4% and expand special bond quotas to approximately 5 trillion yuan, while monetary policy will focus on maintaining ample liquidity and using structural tools to support innovation and consumption [8][9] - The conference highlights the need for policy synergy, integrating existing and new policies to enhance effectiveness and support economic stability [3][10] Group 3: Focus on Quality and Efficiency - The principle of "seeking progress while maintaining stability" is reiterated, with a new emphasis on "quality improvement and efficiency enhancement" to balance short-term economic support with long-term transformation needs [6][7] - The shift from quantity expansion to quality optimization in policy focus is noted, aiming for more efficient, sustainable, and secure development [7][8] Group 4: Investment Opportunities - Key investment opportunities identified include digital trade, green energy, and high-end manufacturing, which are expected to benefit from ongoing reforms and international cooperation [19][20] - The focus on county-level economic development and green transformation is anticipated to open up capital market opportunities in infrastructure, renewable energy, and healthcare services [21][22]