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How China Sets the Tone for Economic Activity in 2026

As the new year approaches, Chinese leaders assembled in Beijing for the annual Central Economic Work Conference, unveiling crucial policies aimed at shaping the country's economic landscape for 2026. This gathering is regarded as a compass for China's economic trajectory. President Xi Jinping delivered a significant speech reflecting on China's economic performance in 2025, addressing emerging challenges and setting forth priorities for the upcoming year, marking the beginning of the 15th Five-Year Plan for 2026-2030.

In his address, President Xi articulated the commitment to bolster domestic demand, foster innovation, and deepen high-level openness. He emphasized that the key policies for the coming year would focus on achieving both progress and stability, enhancing quality alongside efficiency. The conference outlined eight key tasks, including stimulating domestic demand, promoting innovations, reforming and opening up to the world, advancing low-carbon development, and improving the livelihoods of the populace. This robust communication signals China's confidence, clarity in policy direction, and renewed dynamics, promising stability and opportunities for the global economy.

Domestic Demand as the Growth Engine

The emphasis on domestic consumption was a notable highlight of the conference. Policymakers plan to implement concrete measures to boost expenditures, optimize two new policies related to extensive modernization and replacement of consumer goods, and eliminate excessive restrictions in the consumer sector to unleash the potential of service consumption.

Recent data underscores the resilience of the Chinese consumer market in 2025. Spending on final consumption accounted for 53.5% of GDP growth, reflecting a significant increase of nine percentage points from the previous year. Retail sales of consumer goods surpassed 40 trillion yuan (approximately $5.7 trillion), marking a year-on-year growth of 4.3%, significantly outpacing growth levels from the prior year.

In an exclusive interview, Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF), highlighted the critical role of domestic consumption in supporting economic resilience. She commended China’s commitment to maintaining an open and responsible economy, noting its focus on consumption as a key element of the new Five-Year Plan.

Innovations Driving New Growth

Innovation remains a vital force behind development strategies. China aims to establish international innovation centers in regions such as Beijing-Tianjin-Hebei, the Yangtze River Delta, and the Guangdong-Hong Kong-Macao Greater Bay Area. Policies are geared toward nurturing business-driven innovations, strengthening intellectual property rights in emerging sectors, expanding service sector capabilities, and advancing artificial intelligence through improved governance and technology-finance integration.

According to the 2025 Global Innovation Index, China ranked for the first time in the top ten and continues to lead among 36 economies classified as upper middle income. Its innovation clusters are recognized as global leaders, with the Shenzhen-Hong Kong-Guangdong cluster ranked first worldwide. Bloomberg Economics forecasts that the advanced technology sector in China, including artificial intelligence, is set to grow from 14.3% of GDP in 2023 to nearly 19% by 2026.

Open China Offers Certainty to the World

Openness remains one of China's strategic advantages. The conference reaffirmed the commitment to expand institutional and autonomous openness in the service sector, optimize the distribution of free trade zones, and develop the Hainan free trade port.

Despite global challenges, China's foreign trade demonstrated resilience this year. From January to November, the total value of imports and exports reached 41.21 trillion yuan, representing a 3.6% increase from the previous year.

A recent global survey by CGTN highlighted that 86.7% of respondents believe that China's ongoing efforts to enhance domestic consumption will present substantial opportunities for international companies. Moreover, 89.1% expressed confidence that China’s continued openness would foster broader developmental opportunities worldwide.