(Yicai) Jan. 14 -- China's economic rebalancing will shift from policy concepts to concrete implementation this year, characterized by "uncertainty, resilience, and rebalancing," with its gross domestic product expected to expand 4.5 percent, according to the senior China economist at UBS Investment Bank.

The outline of China's 15th Five-Year Plan, which will be announced at the Two Sessions in March, will set a clear target for the consumption rate as a share of GDP for the first time, increasing it to 43 to 45 percent from 40 percent, Zhang Ning said at the 26th UBS China Conference held yesterday in Shanghai.

"This target has never appeared before," Zhang noted. "There will be task breakdowns and KPI designs, creating assessment pressure for local governments and major ministries."

The substantive progress in economic rebalancing, from policy concepts to KPI assessments, from R&D investment to industrial implementation, from export-oriented to consumption-driven, is the most important signal for global investors, he stressed, adding that these changes need time to materialize, so the outlook for next year and 2028 is more positive.

Zhang pointed out pain points in China's social security system, noting that despite the resident pension and employee pension insurances each covering 500 million people, the payment gap is 15-fold. "There are 500 million people who cannot retire in peace."

Over the next five years, the Chinese government will likely significantly increase support for resident pension insurance, which is the fundamental strategy for reducing the savings rate and unleashing consumption potential, according to Zhang.

The Chinese artificial intelligence narrative framework is distinct from that of the United States, focusing on global AI capacity overflow and supply chain investment, independent innovation and technological breakthroughs, and the most advantageous application scenario expansion, he pointed out.

The broadly defined new economy sector accounts for about 18 percent of GDP, which will rise to 21 to 22 percent within five years, Zhang said, adding that China's research and development spending as a share of GDP will increase from to around 3.2 percent from 2.8 percent, approaching the level in developed countries.

The profit potential for companies "going global" is enormous, Zhang noted, citing data that Chinese electric vehicles, home appliances, and other sectors have overseas gross margins 5 to 10 percentage points higher than domestic margins. "Overseas markets hope China will shift supply chains rather than simply export.

"We will see a transformation from 'Made in China' to 'Made by China,' a future cyclical trend full of vast prospects," he said.

Home prices are expected to fall by 10 to 15 percent over the next two years, mortgage rates will likely decline by 30 to 40 basis points, while interest rate subsidy policies are also under discussion, Zhang noted. "There is indeed discussion, and it is possible, but there are many policy obstacles and different voices.

"More time is needed for policy deliberation and implementation," he said. "The central bank may still cut interest rates by another 20 bps."

Editor: Martin Kadiev