Support, not stimulus | the weekly recap

The Central Economic Work Conference (CEWC) concluded on Thursday – wrapping up two days of meetings between China's senior policymakers, as they finalized their goals for China's economy next year.

Our top takeaway: Central government spending will increase in 2026, but the good old days of large-scale stimulus aren't coming back.

• Beijing remains wedded to its goal of delivering productivity-led growth via innovation and industrial upgrading.
• In 2026, officials will deploy additional resources toward putting a floor under the weakest parts of the economy, so they don't derail the main agenda.

In short, Beijing wants to stabilize the economy – and domestic demand in particular – by providing support, not stimulus.

The big picture

The readout from the CEWC is invariably a big-picture policy document that's frustratingly thin on detail.

• The details will come in the weeks and months ahead.
• For the time being, we have to make do with the readout's vague commitments to "optimize" this and "standardize" that.

That said, there are nonetheless certain things we can indeed take away from the CEWC readout.

First, Beijing's main domestic concern is the:

• “Prominent contradiction between strong supply and weak demand”

That's not a surprise. Retail sales of consumer goods have been chronically weak all year. Meanwhile, China's factory output has been going gangbusters.

• Robust export growth has provided China's manufacturers with some relief – but even then, industrial overcapacity has emerged as a huge problem.

So what is Beijing going to do about it?

The CEWC readout promised to "thoroughly address 'involutionary' competition," but that was the only mention of either involution or overcapacity.

Instead, the demand side of the equation got more airtime, with the readout saying Beijing will:

• "Prioritize domestic demand and build a strong domestic market"

On this front, the biggest commitment to new spending was the readout's promise that the central government will support the “stabilization and recovery” of investment by:

• “Appropriately increasing the scale of budgetary investment [in public works]”

That's significant for two reasons.

• First, it acknowledges that the recent collapse in fixed asset investment (FAI) – which declined 12.2% y/y in October and 7.1% in September – is a real problem.
• And second, it shows that Beijing is taking responsibility for reviving investment – and not pushing the fiscal burden down to local authorities.

We've already seen Beijing move in this direction. In October, China’s three policy banks – China Development Bank, China Export and Import Bank, and the Agricultural Development Bank of China – deployed RMB 500 billion via "policy-based financial instruments" to capitalize new infrastructure projects.

The policy banks might have a further role to play next year, with the CEWC saying Beijing will:

• “Continue to leverage the role of new policy-based financial instruments”

Consumption

The CEWC also hinted that the consumer trade-in program will be extended into 2026.

• Since mid-2024, the central government has been providing subsidies to fund discounts for the purchase of new furniture, cars, white goods, and personal electronics – upon trade-in of used possessions.
• Beijing allocated RMB 300 billion to the program in 2025, and now that money has all but run out.

Without new funds, the trade-in program would be dead – and the sale of big-ticket consumer items would likely plunge. However, the CEWC said it will "optimize" the program – a clear sign that it's still got some life. 

• The big question: Will Beijing increase funding for the program, or keep it the same?
• In other words, will officials strive to maintain rates of sales growth, or just prevent sales from falling?
• We'll hopefully get further clarity on this front in January.

Meanwhile, other pro-demand policies were less encouraging.

Indeed, the CEWC signaled that the leadership’s approach to boosting spending remains focused on unlocking “latent” household demand, rather than on increasing household wealth through redistributive policies.

• In other words, Chinese leaders believe household spending is primarily constrained by barriers preventing people from buying things they want – like overcrowded tourist sites or the availability of parking spaces – not a lack of spending power.

Beijing has been pursuing this approach – with limited success – since the end of the pandemic. The CEWC doubled down on it, saying authorities would:

• “Expand the supply of high-quality goods and services”
• “Eliminate unreasonable restrictions on consumption and unleash the potential of service consumption”

That's not to say the CEWC entirely ignored wealth redistribution, which many economists argue is the key to building sustainable long-term demand. In the meeting readout, China's leaders also pledged to:

• “Expand and improve rehabilitative nursing [care], and promote long-term care insurance”

That's a big deal. The cost of providing long-term care for sick parents has been crippling for the first generation of people born under the one-child policy, who are now in their mid-40s.

• This new support would help relieve some of that financial stress – but probably won't translate into a meaningful boost to consumption.

Local governments and property

The CEWC expressed concern about local government debt challenges, saying authorities will:

• “Prioritize addressing local fiscal difficulties”

That wording is new. Previous CEWCs haven’t mentioned “local fiscal difficulties,” a clear signal that central authorities are worried local government fiscal stress is weighing on growth and undermining national strategic goals.

The readout pledged to “actively and in an orderly manner, resolve local government debt risks,” but didn't offer any new solutions.

The property sector got similar treatment. The CEWC readout promised to “make efforts to stabilize the real estate market” through supply-side, “city-level” regulations – such as limiting new housing construction, reducing excess housing inventory, and improving housing quality. However, it served up a familiar list of remedies, including:

• Accelerating the state-sponsored acquisition of unsold housing units and their conversion into affordable housing
• Expanding homebuyers’ access to the housing provident fund (HPF) – a local-government-administered savings scheme that provides below-market-rate mortgage loans
• Increasing the supply of “good housing” – centered around comfort and livability – that better meets the needs of upgrade-oriented buyers

The CEWC thus signals that Beijing is doubling down on the long game in the real estate market – focused on fixing structural issues, rather than juicing demand with a big-bang stimulus.

• These prescriptions aren’t without merit, but they fall far short of addressing the overriding issue dragging down housing demand: a fear that prices won’t rise, and may even decline, going forward.

What it all means

Beijing is preparing to ramp up fiscal spending in 2026.

• However, the goal isn't to deliver growth with stimulus.
• Rather, it's to put a floor under the economy by boosting infrastructure investment, subsidizing purchases of big-ticket consumer goods, and ensuring local government financial stress doesn't drag the economy down further.

Authorities, meanwhile, have a very clear picture of what should drive growth: productivity gains driven by innovation and industrial upgrading.

• The government's role is to ensure that the weak parts of the economy don't derail the economic transformation.

The upshot: Our best guess is that Beijing is preparing for next year to look very much like this year from a policy mix point of view. And that will involve:

• Incremental support for consumption
• Aggressive efforts to expand exports
• An all-out drive into innovation and upgrading of industrial processes
• Further weakening of housing demand
• And ongoing efforts to relieve local government stress – while not fixing the fundamental cause

Dinny McMahon, Head of Markets Research, Trivium China

What you missed

Econ and finance

Per central bank (PBoC) data released Friday, outstanding total social financing (TSF) expanded 8.5% y/y in November, unchanged from October.

• Outstanding RMB loans rose just 6.4% y/y – down from 6.5% in October and the slowest rate on record.
• As has been the case for the past year, the biggest boost to borrowing came from government bond issuance, although the scale of expansion was smaller than a year earlier: net new issuance came in at RMB 1.204 trillion, down from RMB 1.309 trillion in November 2024.

China has little to gain and much to lose from permitting yuan-based stablecoins, according to Wang Yongli – former vice president of the Bank of China and former SWIFT board member.

• ICYDK: On November 28, the central bank (PBoC) reaffirmed a 2021 national ban on crypto-trading, and clarified that it applies to stablecoins – shutting down speculation that yuan-pegged stablecoins could be on the horizon.
• Wang sees ample reason for authorities to shut the door on stablecoins. Instead of hopping on the stablecoin bandwagon, China should “forge its own path” by speeding up the rollout of the digital yuan (e-CNY), says Wang.

Tech

Officials in Beijing are struggling mightily with whether to allow imports of Nvidia’s H200 AI chips, and if so, under what conditions.

• ICYMI: In an about-face earlier this week, US President Trump decided to approve H200 shipments to Chinese customers, with the US government taking a 25% cut.
• While the move may have looked like a major concession, given Beijing’s distaste of US technology export controls, reports quickly surfaced that regulators would limit market access.

The industry regulator (MIIT) is moving to overhaul China’s industrial operating system for 2026.

• On December 8, MIIT unveiled the “Scenario-based and Graph-based Reference Guide for Promoting Digital Transformation in Key Industries (2025 Edition),” which maps out Beijing’s goals for digital transformation across 14 industries.
• This is a clear blueprint for how Beijing intends to build “New Quality Productive Forces” in legacy manufacturing. MIIT is telling provinces and industrial parks which digital capabilities should be deployed and where, reducing fragmentation and accelerating adoption.

Business environment

Companies on both sides of the Pacific have confirmed Beijing is issuing general licenses for export of controlled rare earth magnets.

• On December 10, Chinese magnet-maker Jintian Group confirmed it received a general export license for its rare earth permanent magnet products. Hours later, US automaker Ford Motor Co. said its magnet suppliers were included in “the first batch” of general license recipients.
• ICYMI: The White House said Beijing would issue general licenses to reopen controlled critical mineral flows under the Xi-Trump trade truce struck at the end of October. This is the first explicit confirmation from companies that general licenses are being issued.

Net zero

After months of negotiations, China’s polysilicon mega-fund has finally arrived.

• On Tuesday, nine of China’s leading polysilicon manufacturers joined forces to establish Beijing Guanghe Qiancheng Technology Corporation.
• With a registered capital of RMB 3 billion, the company has been confirmed as the long-rumored vehicle designed to pool funds to acquire and retire excess capacity from smaller domestic polysilicon manufacturers.

Politics

More senior-level personnel reshuffling looks to be in the offing, as Politburo member and former Xinjiang Party Secretary Ma Xingrui was absent from the recently concluded Central Economic Work Conference.

• That’s Ma’s second major absence in as many months, after he missed a Politburo study session in November.
• Ma has deep links to China’s defence and aerospace industries, which have been caught up in the sweeping anti-corruption purge rocking the armed forces. If Ma has been caught up in a corruption scandal, this raises the possibility of further shake-ups within the Politburo.

Foreign affairs

On December 9, Foreign Minister Wang Yi convened a high-level symposium in Beijing to mark the re-issue of the Outline for the Study of Xi Jinping Thought on Diplomacy.

• Wang framed Xi Jinping’s strategic leadership as the “greatest certainty” for tackling global volatility. He also explicitly underscored the need to build a global narrative that is “refreshing to the ears and eyes” of the world.
• Get smart: That last point – which is new, as far as we can tell – is the kicker. It’s a tacit admission that China’s storytelling isn’t landing well overseas.

As always, it was a busy week in China.

• Thank goodness Trivium China is here to make sure you don’t miss any of the developments that matter.