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 set 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 while active fiscal policy remains strong, resource allocation has seen significant marginal adjustments. The focus has shifted from emphasizing consumption over the past two years to balancing consumption and investment. She analyzed that this reflects policy guidance toward directing resources to new quality productivity.

This year’s government work report also features several new highlights, such as proposing to “create new forms 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 pool in AI applications, which constitutes 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 opening-up 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: Which topics and indicators are you paying close attention to at this year’s National Two Sessions? How do you interpret China’s economic growth target for 2026?

Liao Wei: Whenever the National Two Sessions are held, the market tends to focus heavily on government-set growth targets, inflation goals, and other economic development indicators. These metrics have a significant impact on expectations for China’s economic development throughout the year. China’s government has set this year’s growth target at 4.5% to 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 closely with our consistent emphasis on quality growth and the recent promotion of new quality productivity.

In the past, China’s economic focus was on traditional pillars like investment and real estate. 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 main 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. At the same time, developing high-tech and expanding domestic demand are both core tasks.

2026 marks the start 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 and begun to rise again after 2020, steadily increasing. This is thanks to automation and digitalization, which have driven productivity improvements 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 paying special attention to, especially any changes in economic policy?

Liao Wei: Regarding macro policies, the first is fiscal policy. This year, the official deficit target is set at 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 rate is 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 economic growth above 4.5% depends heavily on stable investment. Therefore, there has been a marginal shift in fund distribution—from previous emphasis on consumption to a balanced focus 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 a more comprehensive social safety net. Overall, the government work report features many highlights in the area of people’s livelihoods.

China’s strong export performance stems 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 new 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 fields like AI and humanoid robots, China has established a leading position alongside the US; in biomedicine, Chinese companies hold numerous patents and even attract Western pharmaceutical acquisitions. Aerospace, services, and other sectors have also developed rapidly, and digitalization and automation have effectively improved manufacturing and service efficiency.

Take export performance as an example. China’s exports have remained strong in recent years, driven not merely by low-cost competition or short-term tariff effects, but by substantive improvements in product competitiveness. Products like new energy vehicles and renewable energy equipment have clear advantages in international markets, closely linked to China’s long-term policies on decarbonization and green economy.

It can be said that China’s development path, which emphasizes long-term benefits for humanity, demonstrates policy continuity and coordination. Few countries can translate such consensus into sustained policy support globally. This is why China has seized opportunities in green energy and other fields, 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 focus topics at the Two Sessions 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 advance digital China construction, with the core digital economy industry adding value accounting for 12.5% of GDP. How do you see the role of developing the smart and digital economy in supporting China’s high-quality growth and industrial upgrading?

Liao Wei: 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 area.

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

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 aspects, creating favorable conditions for widespread AI application.

Looking ahead, with increased R&D investment and stronger government support, the deep integration of AI with manufacturing and services will generate many 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 clearly states the 2026 government tasks, emphasizing further opening-up at a high level, adhering to win-win cooperation, steadily expanding institutional opening, and promoting international circulation to foster 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 promote high-level opening-up, aiming to be 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 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, RMB internationalization will facilitate two-way capital flows, opening broader business space for foreign banks.

(Article source: 21st Century Business Herald)