China’s dual economy didn’t fire on all cylinders in 2025. Waning domestic demand left the Chinese economy reliant on exports to drive economic momentum. Export trends underpinned the importance of improved trade terms with key partners. Nevertheless, Beijing’s focus on domestic consumption could be key in the year ahead should global economic momentum slow.
Beijing Announces Measures to Boost Consumption
The NDRC’s announcement coincided with Beijing’s fresh measures to drive domestic demand. This week, Beijing announced several measures, including:
- Extension of personal consumption loan interest subsidies to the end of 2026.
- 1.5% annual interest subsidy to SME private firm loans in 2026.
- Extension of tax and fee incentives for elderly care, childcare, and domestic services until the end of 2027.
- Increased fiscal spending in 2026.
- Expansion of interest subsidies to credit card installments (1% rate).
IMF Raises China’s 2026 Growth Projection
Beijing’s monetary and fiscal policy support will be crucial to the bullish short- to medium-term outlook for Mainland indices. This week, the International Monetary Fund (IMF) increased its 2026 growth projection to 4.5%, up from its October forecast of 4.2%. The IMF attributed the improved outlook to lower US tariffs and expectations of further policy support from Beijing.
Goldman Sachs projected 4.8% growth for 2026, citing China’s exporters diversifying to non-US markets. However, Goldman Sachs Research downplayed the prospect of domestic consumption and services contributing. Chief China Economist Hui Shan commented:
“Although Chinese exporters have successfully diversified into non-US markets, supporting our positive outlook for Chinese exports, building a consumption- and services-driven economy will take years, if not decades.”
Hui Shan’s view further underscores the importance of improved trade relations and robust external demand for economic growth.
Key Downside Risks to the Bullish Outlook
Despite the optimistic outlook, downside risks could derail the positive projections. These include:
- A breach of the US-China trade war truce.
- Global tariffs on Chinese shipments.
- Beijing postpones monetary policy easing and fresh fiscal stimulus.
- Slowing external demand for Chinese goods.
- Weaker domestic consumption.
- Chinese housing market crisis intensifies.
These scenarios could send the Hang Seng Index and CSI 300 below their 50-day EMAs, signaling near-term bearish trend reversals.
Despite these risk factors, China’s advancements in the AI space, increased self-reliance on chip manufacturing, and improving global relations reaffirm the constructive short- to medium-term bias for Mainland China indices.
Economists and traders are optimistic that Beijing can fuel domestic demand through lower borrowing rates and subsidies, while stabilizing the housing market.
CSI 300 Technical Outlook: Resistance Levels in Focus
Technicals and fundamentals remained aligned in early trading on Thursday, January 22. Viewing the daily chart, the CSI 300 trades above its 50-day and 200-day EMAs, indicating bullish momentum.
A breakout above the January 13 high of 4,817 would bring 5,000 into play. A sustained move through 5,000 would pave the way toward the 2021 all-time high of 5,931. Avoiding a sustained drop below the 50-day EMA is key for the bullish outlook.
