China’s National People’s Congress is expected to set a 2026 real GDP growth target of 4.5–5.0%, with a forecast outcome of 4.7%. Growth is projected to slow from 5.0% in the last two years, while nominal growth may rise as deflation eases.
Of China’s 31 regions, 21 lowered their 2026 growth targets compared with 2025. Guangdong set a 4.5–5.0% target, down from about 5% in 2025.
Inflation And Price Targets
A CPI target of around 2% is expected for 2026, after China set its CPI target below 3% for the first time since 2004. CPI inflation is forecast at 0.9% in 2026, up from 0% in 2025.
Producer prices are forecast to rise by +0.2% in 2026 after falling for three years, with 2025 at -2.6%. Recent inflation has stayed below official targets, with wider gaps in the past three years.
Fiscal policy is expected to keep the deficit near 4% of GDP in 2026. Special local government bond quotas may rise from a record CNY4.4 tn in 2025.
Ultra-long-term special treasury bond issuance is projected at about CNY1.5 tn, up from CNY1.3 tn in 2025. Monetary policy assumptions include a 10-bps rate cut and a 50-bps RRR reduction, likely in 1H26.
Market Positioning Implications
We see the upcoming National People’s Congress setting a lower growth target of 4.5-5.0% for 2026, a step down from the roughly 5% goals of the past few years. This reflects a broader slowdown, as 21 of 31 provinces have already lowered their own targets for this year. While real growth may slow, the shift away from the deflation we saw in 2025 could support a pickup in nominal growth.
The expectation for modest monetary easing to be frontloaded in the first half of the year is the most immediate factor for us. With January 2026 CPI figures remaining flat and the Caixin Manufacturing PMI hovering just at the 50-point mark, the case for a near-term cut to the policy rate and reserve requirement ratio is strong. This suggests positioning for a short-term boost in Chinese equities, perhaps through call options on indices like the FTSE China A50, ahead of any official announcement.
The government’s plan to lean heavily on fiscal stimulus presents clear opportunities in specific sectors. An increase in special local government and ultra-long-term treasury bonds, building on the record issuance in 2025, will directly benefit infrastructure and industrial commodities. Watching futures contracts for industrial metals like copper, which has stabilized around $8,500 per tonne in early 2026, could be a way to trade this theme.
These competing forces of slower headline growth and aggressive stimulus will likely impact the currency. While monetary easing could pressure the yuan, government spending may offer support, potentially increasing volatility in the USD/CNY pair. Implied volatility in the options market has already ticked up in February, suggesting that traders could use straddles to position for a significant price move in the coming weeks without betting on a specific direction.
