TD Securities analysts expect Premier Li to set a 4.5–5.0% GDP target range for 2026 at the Two Sessions. They also forecast a broad budget deficit of about 9% of GDP, implying an accommodative fiscal stance.
Policy is expected to focus on boosting domestic demand in 2026. This is framed as using both consumption-led measures and investment-focused policies.
Gradual Shift Toward Consumption
The shift towards consumption is described as a gradual attempt to diversify the economic engine. The approach is linked to weakness in Fixed-Asset Investment (FAI) in the second half of 2025.
Targeted consumer support is expected to continue. The consumer trade-in programme is cited as a stimulus tool likely to run into 2026.
With China’s Two Sessions meeting just around the corner, we are positioning for an official 2026 GDP growth target announcement between 4.5% and 5.0%. This growth will likely be financed by a large budget deficit approaching 9% of GDP. This signals a strong commitment to stimulating the economy.
This aggressive fiscal stance is a direct response to the poor economic data we saw in the second half of 2025. Full-year Fixed-Asset Investment for 2025 grew by only 2.8%, a multi-year low, primarily due to the ongoing struggles in the property market. Policymakers now need to boost domestic demand to make up for this shortfall.
Derivatives And Market Positioning
For derivatives traders, this points to buying call options on industrial commodities in the coming weeks. With iron ore prices recently consolidating around the $120-$125 per tonne level, any confirmation of new infrastructure spending could trigger a significant rally. We see similar upside potential in copper futures, which are sensitive to manufacturing and construction activity.
In currency markets, we expect this stimulus to be bullish for the Australian dollar, a key proxy for Chinese demand. Traders should consider long positions in AUD/USD futures to capitalize on rising commodity prices. However, the sheer size of the deficit could weigh on the offshore yuan (CNH), creating a potential shorting opportunity against the dollar.
We are also watching equity derivatives, particularly those tied to consumer sectors. The expected continuation of the consumer trade-in program, which helped boost auto sales by over 12% in late 2025, should directly benefit specific companies. Call options on ETFs focused on Chinese consumer discretionary goods and electric vehicle makers appear attractive.
