Exclusive Interview with Standard Chartered Bank China Senior Economist Liao Wei: China's Economic Growth Targets Are Realistic and Leave Room for Medium- to Long-Term Transformation

On March 5th, the 14th National People’s Congress held its fourth session, and the government work report’s annual economic growth target and macro policy guidance drew public attention.

That day, Standard Chartered Bank China’s Senior Economist Liao Wei told 21st Century Business Herald that this year’s expected growth target of 4.5%–5% is pragmatic and flexible. “A flexible economic growth target allows room for structural adjustments and enables a focus on medium- and long-term development goals and plans, rather than just short-term GDP growth.”

Regarding macro policies, Liao Wei pointed out that active fiscal policy has maintained its strength while experiencing significant marginal adjustments in resource allocation, shifting from a focus on consumption over the past two years to a balanced emphasis on consumption and investment. She analyzed that this reflects policy guidance directing resources toward new quality productivity.

The government work report also features several new highlights, such as proposing to “create a new form of intelligent economy.” “Artificial Intelligence+” has been included in the government work report for three consecutive years, and “smart economy” is mentioned for the first time.

Liao Wei believes that artificial intelligence and digital economy will become the core engines of global economic growth over the next decade, and China has significant advantages in this field. She emphasized that China has a solid infrastructure and talent reserves in AI applications, forming a unique first-mover advantage. “In the future, with continued increases in R&D investment and stronger government support, the deep integration of AI with China’s manufacturing and service industries will generate numerous new products, services, and demands. This process will become the most important endogenous driver of China’s economic growth.”

Further expanding high-level opening-up remains a key focus of this year’s government work report. Using financial openness as an example, Liao Wei said that RMB internationalization is creating new opportunities for foreign banks. “The rising demand for cross-border RMB use and related capital market opening policies are expected to be gradually introduced, opening broader business space for foreign banks.”

Emphasizing the importance of high-tech development

21st Century: What topics and indicators are you paying attention to at this year’s National Two Sessions? How do you interpret China’s economic growth target for 2026?

Liao Wei: Every time the National Two Sessions are held, the market pays close attention to government-set growth targets, inflation goals, and other economic indicators. These metrics significantly influence expectations for China’s economic development throughout the year. China’s government has set this year’s growth target at 4.5%–5%, which I believe is highly meaningful. This move not only reflects a pragmatic adjustment of goals but also indicates that the government allows flexibility in growth targets, showing a greater emphasis on medium- and long-term economic development.

After years of rapid growth, China’s economy now faces certain challenges, including an aging population. Meanwhile, structural changes are underway, such as real estate adjustments and emerging industries rising. Reform is a long-term process. A flexible growth target provides space for us to focus more on medium- and long-term development goals and plans, rather than just short-term GDP growth. This aligns with our consistent focus on quality growth and the recent emphasis on developing new quality productivity.

In the past, China’s economic attention was mainly on investment and real estate, traditional pillar industries. Now, this focus has shifted. For example, the government work report this year highlights policies related to the “14th Five-Year Plan,” especially the layout of emerging industries. Data shows that the proportion of real estate in GDP has significantly declined after several years of adjustment, while emerging industries continue to increase their share. China’s economic growth is driven by two engines: first, improving development quality; second, cultivating emerging industries to inject new momentum. Specifically, domestic demand includes consumption and investment. Consumption is being cultivated as a new growth point, such as service consumption, while investment focuses on emerging industries, high-tech, and new infrastructure to promote industrial upgrading. These “new investments” are key manifestations of new quality productivity. Simultaneously, developing high-tech and expanding domestic demand are both core tasks.

2026 marks the beginning of the “14th Five-Year Plan” and is also seen globally as the AI Year One. Technology, especially AI, plays an increasingly important role in national security and economic development. China has already seen positive results: over the past five years, total factor productivity has stopped declining after 2020 and has steadily increased. This is thanks to automation and digitalization, which have boosted productivity and supported GDP growth of over 5%. Looking ahead five to ten years, high-tech and AI will become the main engines of economic growth, and the government work report emphasizes this extensively.

21st Century: What policies in the government work report are worth focusing on, especially any changes in economic policy?

Liao Wei: Regarding macro policies, first is fiscal policy. This year, the official deficit target is around 4%, the same as last year. Meanwhile, the issuance scale of ultra-long-term government bonds and local bonds remains large, indicating that the strength of active fiscal policy aligns with this year’s growth target. Existing fiscal support measures are expected to sustain China’s over 4.5% growth.

Second, resource allocation in fiscal policy deserves attention. The government work report states that this year’s deficit will be around 4%, and plans to issue 1.3 trillion yuan of ultra-long-term special bonds, mainly for “dual” construction and “two new” projects. Among these, 250 billion yuan of ultra-long-term special bonds are allocated to support consumption upgrades like old-for-new policies, slightly less than last year’s 300 billion yuan, mainly considering that such policies might overdraw future demand and have diminishing marginal effects, reflecting an optimization of fund allocation. Meanwhile, funding for equipment renewal remains ample, showing strong support for manufacturing investment.

This year, maintaining over 4.5% economic growth depends on stable investment. Therefore, there has been a marginal shift in fund distribution—from a past focus on consumption to a balanced emphasis on both consumption and investment.

Additionally, social spending continues to increase. Policies focus on “investing in people,” including increasing local government expenditure on social welfare, raising social security standards, and implementing stable employment and income-increase plans. These measures aim to fundamentally boost domestic demand—giving residents the ability and confidence to consume, and providing more comprehensive social security. Overall, the government work report features many highlights in the area of people’s livelihoods.

China’s strong exports stem from improved product competitiveness

21st Century: The government work report mentions building emerging pillar industries such as integrated circuits, aerospace, biomedicine, and low-altitude economy. It also aims to cultivate future industries like energy, quantum technology, embodied intelligence, brain-computer interfaces, and 6G. How do you view China’s recent economic transformation? What experiences in high-quality development are worth sharing?

Liao Wei: Over the past few years, China has made significant progress in many areas, though these advances may not be fully reflected in macro indicators. For example, in high-tech, China has formed a leading position alongside the US in AI and humanoid robots; in biomedicine, Chinese companies hold numerous patents and even attract Western pharmaceutical acquisitions. Aerospace, services, and other sectors have also developed rapidly, with digitalization and automation significantly improving manufacturing and service efficiency.

Take export performance as an example. China’s exports have remained strong in recent years, not merely driven by low prices or short-term tariff effects (“export grabbing”), but by substantive improvements in product competitiveness. Products like new energy vehicles and renewable energy equipment have clear competitive advantages internationally, closely linked to China’s long-term policies supporting decarbonization and green economy.

It can be said that China demonstrates policy continuity and coordination in pursuing development directions related to long-term human and societal well-being. Few countries can effectively translate such consensus into sustained policies. This is why China has seized opportunities in green energy and new energy sectors, forming a unique high-quality development experience. Many countries are now learning from these experiences.

First to mention “smart economy”

21st Century: One of this year’s Two Sessions focuses is how to promote the development of the smart economy. Currently, AI technology is deeply integrated into various industries across China. Additionally, the government work report proposes to deepen digital China construction, with the core digital economy industry accounting for 12.5% of GDP. How will developing the smart and digital economy help China achieve high-quality growth and industrial upgrading?

Liao Wei: Artificial intelligence and the digital economy will become the core engines of global economic growth over the next decade, and China has significant advantages in this field.

In R&D, China is roughly on par with the US, though gaps remain, and these are gradually narrowing. More importantly, China has unique infrastructure advantages in application: abundant energy supply, extensive power grid coverage, high internet penetration, and a large pool of engineers and computer talents, providing solid support for AI implementation.

In contrast, while the US leads in R&D, achieving deep integration of AI with industry and services still requires large-scale infrastructure expansion. China has already laid a good foundation in these areas, creating early conditions for widespread AI application.

Looking ahead, with increased R&D investment and stronger government support, the deep integration of AI with China’s manufacturing and service sectors will generate numerous new products, services, and demands. This process will become the most important endogenous driver of China’s economic growth.

RMB demand creates new opportunities for foreign banks

21st Century: The government work report sets 2026 as a key year, emphasizing further opening-up at a high level, pursuing win-win cooperation, steadily expanding institutional openness, and promoting reform and development through openness. What opportunities will foreign banks encounter?

Liao Wei: Over the past two years, amid rising global protectionism, China has continued to emphasize high-level opening-up, aiming to become a model for multilateral cooperation worldwide. In finance, this high-quality opening-up offers new opportunities for foreign banks.

On one hand, with active two-way investment—more foreign capital entering China and more Chinese companies going abroad—cross-border capital flows are expected to increase further. As a bridge connecting domestic and international markets, foreign banks will have more opportunities to serve the real economy and cross-border business.

On the other hand, RMB internationalization is accelerating. Influenced by international geopolitical shifts, cross-border RMB usage demand is rising, and related capital market opening policies are expected to be gradually introduced. Whether in trade settlement, investment allocation, or capital account management, the dual-direction capital flows driven by RMB internationalization will open broader business space for foreign banks.

(Article source: 21st Century Business Herald)