China Shifts to "Targeted Stimulus" — Domestic Demand and Te…

중국 전인대가 열리는 행사장 모습 / 사진 전인대 홈페이지 갈무리

China's economic policy direction unveiled at this year's National People's Congress (NPC) marks a clear departure from the country's traditional playbook of broad-based fiscal expansion. Rather than flooding the economy with spending, Beijing is zeroing in on specific sectors — a strategy analysts are calling "selective stimulus."

A research report by Meritz Securities analyzing the NPC proceedings characterizes this year's approach as a combination of targeted fiscal support and fine-tuned microeconomic policy tools. Instead of deploying large-scale stimulus packages in response to slowing growth, Chinese policymakers appear to be concentrating resources where they expect the highest returns.

GDP Target Set at 4.5–5.0%

The government set its official GDP growth target for 2026 at 4.5–5.0%, the first downward revision in three years since 2023. While the headline number signals a modest pullback in ambition, the details tell a more nuanced story.

Buried in the fiscal report is a nominal GDP growth assumption of 5.04% — notably higher than the real growth target. Analysts see this as a deliberate signal: Beijing wants to engineer a recovery in price levels, not just output volumes. It is, in effect, a policy declaration that China intends to exit deflation this year.

The urgency is not hard to understand. China's GDP deflator came in at -0.6% in the fourth quarter of 2025, and dipped below -1% during parts of 2024. Against that backdrop, Meritz Securities has revised its 2026 China GDP growth forecast upward from 4.6% to 4.8%.

시진핑 중국 국가주석이 전인대에 참석한 모습 / 사진 전인대 홈페이지 갈무리

Consumption Policy Anchored in Income Growth

On the demand side, this year's NPC took a notably different approach to consumer stimulus. Rather than relying on one-time subsidies or vouchers, policymakers are targeting the underlying drivers of household spending — namely, income.

The policy documents explicitly referenced corporate cash dividends and share buybacks as tools for expanding household wealth income, alongside more conventional measures like minimum wage hikes and a skills-based compensation system. The combination has drawn comparisons to a Chinese-style "value-up" program merged with productive finance principles.

Structural improvements to the consumption environment were also on the agenda — integrating online and offline retail markets, upgrading the service sector, and expanding paid leave and holiday systems to unlock latent consumer spending.

Real Estate: No Longer a Target for Rescue

China's property market has now been in a prolonged downturn for six consecutive years. Transaction volumes, new construction starts, and completions are all declining, and mortgage lending continues to contract despite falling interest rates — a textbook demand-side slump.

Beijing's posture toward the sector has solidified around "stabilization" and "quality development." The era of bailing out developers or engineering a property-led recovery appears to be over. Policy focus has shifted to repurposing existing housing stock as affordable housing and tightening oversight of construction projects through a whitelist approval system.

자오러지 중국 전인대 의장 / 사진 전인대 홈페이지 갈무리

Technology-Led Industrial Strategy Remains the Backbone

China's 15th Five-Year Plan (2026–2030), which was formally unveiled alongside the NPC proceedings, places the construction of a modern industrial system at the very top of its priority list — up from second place in the previous plan.

The central theme is integration. Where the 14th Five-Year Plan focused on internalizing core technologies and building foundational capabilities, the next five years are about combining those capabilities into industrial ecosystems that generate real economic value. Ten strategic industries have been identified for priority development: semiconductors, embodied AI, biotechnology, next-generation batteries, commercial aerospace, domestically produced aircraft, urban air mobility (UAM), hydrogen energy, brain-machine interfaces, and advanced medical devices.

Underpinning all of them is China's "AI+" strategy — particularly the "Model-Chip-Cloud-Application" framework, which aims to move AI from being something China talks about to something its factories and industries actually run on.

R&D spending is targeted to grow at an annual average of 7% or more, while the share of digital core industries in GDP is set to rise from 10.5% to 12.5% by 2030.

Market Outlook: Tech Stocks Still Favored, Materials Worth Watching

Meritz Securities expects the near-term market impact of the NPC to be limited, given that the policy content largely aligned with consensus expectations. Over the medium to long term, however, a technology-focused investment strategy remains the firm's preferred approach.

Within China's equity markets, the STAR Market 50 index is seen as better positioned than the Hang Seng Tech index, supported by a recovery in global semiconductor conditions and rising market share for Chinese domestic chipmakers. A meaningful re-rating of Hang Seng Tech, the report argues, would require clearer signs of consumer recovery and improved earnings visibility for China's AI sector.

Traditional cyclical sectors — nonferrous metals, chemicals, and steel — also drew attention as potential opportunities. With Beijing dialing back its headline growth ambitions and pushing anti-involution policies to curb excess competition, supply constraints could provide a floor under materials prices in the months ahead.