China's Economic Balancing Act: External Strength vs. Domestic Challenges

Chinese authorities pledged to prioritize domestic consumption in 2026, but skepticism remains about the needed fiscal support. The economy might grow by 5% due to exports, with limited domestic spending. The Central Economic Work Conference outlined measured policy support, highlighting challenges in boosting domestic demand amidst a strong external trade surplus.

Chinese authorities last week committed to prioritizing domestic consumption in 2026, but doubts linger about the adequacy of fiscal support necessary to achieve this goal.

Despite the central government's promise for growth linked to booming exports, the outlook for domestic spending remains dim, as revealed during the Central Economic Work Conference.

Barclays and Societe Generale economists anticipate cautious fiscal measures next year, emphasizing the challenge of igniting domestic demand in the face of an extensive trade surplus and a depreciated yuan.

(With inputs from agencies.)