China: Premier Li Qiang urges "countercyclical" policy efforts be stepped up again

Research evidence excerpt

China: Premier Li Qiang urges "countercyclical" policy efforts be stepped up again

Nomura | Asia Insights 14 July 2026

economy and the flexibility of policy implementation, while dropping the wording of “using

multiple tools to step up monetary policy efforts”. We view these subtle changes as

supporting our view of no imminent rate or RRR cuts. The PBoC will hold a press

conference at 3pm on 15 July, where Deputy Governor Zou Lan will brief on H1 2026

financial statistics and monetary policy implementation. This briefing might give better

clarity on the PBoC’s near-term policy stance, including its RMB outlook.

Fiscal efforts will likely become the key policy focus in H2

September 2024 marked a material shift in Beijing’s fiscal policy stance to support the

weak domestic economy, as evidenced by the large increase in the official fiscal deficit

ratio to 4.0% of GDP in 2025-26 from a long tradition of 3.0%. However, amid better-than-

expected growth in Q1 and the slightly lower growth target for this year, fiscal efforts have

clearly decelerated in Q2, exacerbating the weak aggregate domestic demand. With

mounting growth headwinds and a renewed focus on “countercyclical” policy measures,

we believe Beijing will likely step up its fiscal efforts again.

With the renewed sharp declines in investment in Q2 and Beijing’s commitment to

stabilizing investment, we believe Beijing will likely accelerate bond issuance and step up

fiscal spending in coming months. The AI sector will likely become an even more strategic

policy focus, as China seeks to nurture its own full AI supply chains and pursue

technology self-reliance.

Beijing is likely to accelerate the issuance of government bonds and the use of RMB800bn

“newpolicyfinancingtools(NPFT)” to stem the investment slump.