(Yicai) Dec. 9 -- China’s top leadership has set a more proactive and coordinated economic policy direction for next year to boost domestic demand.

The Politburo, which held its last monthly meeting of the year yesterday, said the government will continue with a more proactive fiscal stance and a moderately loose monetary policy in 2026, leveraging existing and new tools, and strengthen counter-cyclical and cross-cyclical regulation, according to the official readout.

The decision-making body’s language has shifted to “seek progress while maintaining stability and improving quality and efficiency,” with the added call to raise the efficacy of macroeconomic governance, from “seek progress while maintaining stability, and promoting stability through progress” a year earlier.

The phrasing “strengthen extraordinary counter-cyclical regulation” was also replaced with “intensify counter-cyclical and cross-cyclical regulation.”

The updated wording highlights a greater emphasis on the quality and efficiency of medium- to long-term growth as China enters the first year of its 15th Five-Year Plan period.

Next year’s policy orientation will be more proactive, aiming to resolve structural imbalances and nurture new growth drivers through more precise and effective policy measures, experts told Yicai.

According to a report by the Academy of Macroeconomic Research, the economy faces three deep-seated challenges: households have limited spending power and are reluctant to consume; innovation is insufficient and industrial upgrading is lagging; and the real economy faces rising costs, tight financing, and barriers to market access.

Compared with July’s Politburo meeting, the latest readout removed references to “maintaining ample liquidity” and “promoting the decline of overall social financing costs,” while adding the phrase “intensifying counter-cyclical and cross-cyclical regulation.” Monetary policy has been strengthened recently with new tools rolled out by the People’s Bank of China.

Tao Chuan, chief economist at Guolian Minsheng Securities, said next year’s monetary policy tone is likely to continue along this track, noting that after the central bank introduced the term “cross-cycle adjustment” cuts to interest rates and the reserve requirement ratio became less frequent, implying greater reliance on structural monetary tools.

Ming Ming, chief economist at Citic Securities, said monetary policy will aim to support stable growth and prevent risks, with a stronger focus on steadying expectations and working in tandem with proactive fiscal policy.

Given the fourth-quarter’s still weak internal growth drivers, the high base in the first half of next year, and the start of the 15th Five-Year Plan, Ming expects monetary easing may step up moderately from the end of this year through the first half of 2026 to lower financing costs and steady market expectations.

The experts who spoke to Yicai suggest keeping the fiscal deficit ratio at no less than 4 percent next year to signal the government’s intention to maintain reasonable expansion and help steady expectations.

They also recommend moderately raising special treasury bond and local government special bond sales, lifting new government borrowing above last year’s CNY12 trillion (USD1.7 trillion), and allowing general public budget expenditure to grow at a pace close to the expected economic growth target.

The Politburo reiterated the need to expand domestic demand and build a strong internal market. Zhang Jun, chief economist at China Galaxy Securities, said weak demand remains the core constraint on the economy, adding that trade-in incentives may continue and plans to boost service sector consumption may be on the cards.

Shen Jianguang, chief economist at JD.Com, said the government may roll out some short-term consumption-boosting measures in tandem with structural reforms and social welfare improvements to prevent a sharp decline in consumption growth.

Editor: Emmi Laine