(Yicai) Jan. 28 -- China should rely more on monetary policy to expand domestic demand and stimulate the endogenous momentum of economic recovery, according to a senior researcher at the China Finance 40 Forum.

"2026 is a very good time to strengthen counter-cyclical adjustment and expand domestic demand, and it is also a crucial year, as the economy has already shown an upward recovery momentum," Zhang Bin, who is also the deputy director of the Institute of World Economics and Politics, Chinese Academy of Social Sciences, said at a press briefing on the CF40's macroeconomic policy report for the fourth quarter of 2025.

Even though there is still room for government public investment, the space for further substantial fiscal efforts is constrained by concerns over the rapid rise in public debt, the decline in overall financial strength, and the increasing difficulty in coordinating investable projects, Zhang noted.

In this context, he suggests that the economic recovery needs to shift from a ‘government-led’ approach to a dual-driven model of ‘government-led + market-driven forces,’ with the role of monetary policy being particularly critical.

Fiscal measures should be further optimized structurally and, in addition to initiatives like trade-ins, there should be a greater focus on "spending money on issues that the public finds difficult to resolve on their own," Zhang said.

An accommodative monetary policy should work by "changing expectations," he believes. By implementing clearer inflation expectation management and significantly lowering policy interest rates, China will likely encourage private enterprise investment and residential property purchases, thereby activating the endogenous growth momentum for sustained economic recovery.

Despite experiencing great external shocks last year, the Chinese economy has maintained strong resilience and has exhibited many characteristics typical of the early stages of an economic recovery, according to the report.

Financial indicators, such as the stock market, the Chinese yuan exchange rate, social financing growth, and corporate deposits, have shown notable improvements, corporate profits have stopped the downward trend seen over the past several years, and consumption and the labor market are generally operating smoothly, the report noted.

The forces supporting the economic recovery last year mainly came from fiscal policies, external demand, and prior price adjustments, the report added. Investment and the real estate market still face significant pressure, and the endogenous momentum of the economy remains relatively weak.

The strength of counter-cyclical adjustment policies this year will still be crucial, with monetary policy serving as a key reliance for activating the endogenous growth momentum of the economy, making it the top priority, the report showed.

If private enterprises' investment and residential housing demand fail to fully recover, the overall social spending will remain low, limiting the growth of overall income levels and failing to support household income and consumption, per the report.

Based on optimistic expectations for overseas demand, fixed asset investment, household consumption, and policy support this year, as well as the numerous constraints on interest rate cuts, there may not be a need for overly aggressive monetary policy, said Guo Kai, executive president of the CF40.

Editor: Futura Costaglione