UBS(US:UBS)2026-01-13 11:56Summary of Key Points from the Conference Call Industry Overview - The focus is on the Chinese economy and its projected performance in 2026. Core Economic Forecasts - GDP Growth: Expected to slow to 4.5% in 2026 from around 5% in 2025, primarily due to a reduced contribution from net exports [2][6][25]. - Exports: Anticipated to decelerate, with a forecasted growth of 2.5-3% in 2026, influenced by global demand slowdown and US tariff impacts [6][7][40]. - CPI Inflation: Expected to rise to 0.4% in 2026, while PPI is projected to narrow its decline [2][16][21]. - RMB Exchange Rate: Anticipated to appreciate against its currency basket but stabilize against the USD, with a forecast of 7.0/6.9 for USDCNY by end-2026/2027 [20][23]. Key Themes and Policy Support - Policy Tone: A modestly supportive and balanced policy stance is expected, with a stable budget deficit at 4% and fiscal expansion of 0.5-1% of GDP [3][25]. - Interest Rates: A 20bps cut in policy rates is anticipated by the end of 2026, along with a 25-50bps reduction in RRR [3][25]. - Innovation Focus: The government aims to boost innovation, with R&D spending expected to rise from 2.7% of GDP in 2024 to over 3.2% by 2030 [26][27]. Sector-Specific Insights - Property Market: The downturn is expected to continue, with property sales and investment projected to decline by 5-10% in 2026 [8][39]. - Consumption: Growth is expected to remain modest but softer, influenced by reduced trade-in subsidies and a normalization of auto purchase taxes [14][39]. - Fixed Asset Investment (FAI): A modest recovery is anticipated in 2026, particularly in infrastructure, supported by delayed project kick-offs and special financing tools [15][39]. Risks and Uncertainties - US-China Relations: Ongoing trade tensions could pose risks, with potential for new disputes despite a current truce [41][42]. - AI Development: The trajectory of AI investment and its impact on productivity remains uncertain, with potential upside or downside risks depending on market conditions [42][39]. Additional Considerations - Structural Changes: The government is focusing on anti-involution measures and market opening, aiming to enhance property rights and streamline market access [28][39]. - Fiscal Measures: The new Five-Year Plan will emphasize household consumption and social safety net improvements, indicating a shift in consumption policy [14][25][39]. This summary encapsulates the key points discussed in the conference call regarding the Chinese economy and its outlook for 2026, highlighting both opportunities and risks.