Three economic flashpoints for 2026

This report is from this week’s CNBC newsletter The China Connection, bringing you insights and analysis into what’s driving the world’s second-largest economy. You can subscribe Here.

China is closing 2025 with much more confidence on the world stage than at the beginning of the year.

It became the first major economy to retaliate against US “Emancipation Day” tariffs and increasingly began to play the rare earth card. Tech companies bypass US chip restrictions and hit the market Low-cost AI models that rival much more expensive U.S. offerings such as OpenAI. Global perceptions of China developing.

It is less clear whether China’s economy more broadly exudes the same level of confidence.

The country’s top leaders are expected to discuss policy plans for 2026 at the annual “Central Economic Work Conference” next week. Although no dates were officially released, the conference took place from: Last year, 11-12 December.

Here are three important developments that economists are watching:

China’s real estate problems have gotten worse in many ways this year, with the latest targeting the real estate giant vanketheir financial struggles.

Once one of China’s largest developers in terms of sales and an iconic local brand, Vanke trying to delay Repayment of 2 billion yuan ($283 million) of onshore bonds due to mature on December 15. This news led S&P Global Ratings to make the following decision: Reduced Vanke’s debt late last week.

“Home buyers’ confidence in China is already quite fragile. [Vanke has to pursue distressed financing] That could possibly hit sentiment further,” said Edward Chan, director of corporate ratings at S&P Global Ratings.

“This could also drag on real estate sales across the country,” he said. He added that there is a mortgage subsidy plan. reportedly discussed It seems unlikely to reverse the decline in real estate sales.

Goldman Sachs said over the weekend that new home sales in November were down 20% to 30% from a year ago. “In our view, the likelihood of another set of property facilitation measures being introduced has increased,” analysts said. he said.

But how bad is too bad?

As of October, average monthly sales nationwide were still 65.3 billion yuan below 2024 levels, Chan said.

“It’s difficult to gauge now what level the government would consider to be a broader level of concern.”

Beijing clearly has other things on its mind.

Following a five-year planning meeting in late October, policymakers signaled greater resolve. Increase domestic consumption. This was just days before top leaders, including Chinese President Xi Jinping, were to leave Beijing for high-level trade talks with the United States and other countries.

Last week, six ministries jointly released a comprehensive plan to develop consumer industries ranging from electronics to sporting goods. At least three sectors must be valuable 1 trillion yuan Each of them should reach 100 billion yuan by 2027, and the other 10 in the same period, the document said. However, the plan did not specify how this would be done.

“Financing arrangements and implementation details are missing,” Goldman Sachs analysts wrote in a report over the weekend, noting that there is a clear emphasis on integrating artificial intelligence into consumer product development and services.

“Overall, this plan focuses entirely on the supply side,” analysts said, “and we continue to believe that sustained consumption growth will require policy support for job creation and income gains.”

It is worrying that the bad loan rate of households in China reached 1.33% in the first half of this year. exceeding the corporate rateAccording to Natixis, this rate dropped to 1.2%.

Gary Ng, senior economist at Natixis, said businesses can restructure but households have far fewer options, especially as pressure continues from property and labor markets.

Since the pandemic, Chinese consumers have become increasingly price conscious, while companies have increased competition for their wallets through price cuts.

Despite extended promotions running from early October to mid-November, China’s biggest shopping event of the year saw a surge in sales It slowed to 14.2% from 26.6% last year, according to third-party analysis.

Headline inflation has remained close to zero in recent months. But a much larger increase of 1.2 percent “Core” CPI, which excludes food and energy pricesIt’s not very reassuring.

Nomura’s Chief China Economist Ting Lu estimated last week that roughly a quarter of those inflation gains were due to a rise in gold prices, based on his analysis of official figures. He said when you take that out, the core CPI was just 0.9% in October.

Lu expects Beijing to step up policy support in the spring to get off to a solid start in the country’s upcoming five-year plan.

China will release November inflation data on December 10, followed by retail sales, industrial production and investment figures on December 15.

Humanoid robot bubble? China economic agency spokesman warned on Friday With more than 150 companies flocking to the industry, there will be a glut of humanoid robots. The agency plans to publish industry guidelines.

Alibaba is launching artificial intelligence glasses. On the heels of its AI app refresh, the Chinese e-commerce giant on Thursday launched sales of its smart frames for $500 in China, a market where the Meta Ray-Ban Display glasses are not officially available.

Hong Kong fire attracts donors’ attention. Major Chinese companies, from Tencent to Alibaba subsidiary Ant Group, pledged support for rescue efforts last week for millions of people following the deadliest Hong Kong fire since 1948. At least 156 people died.

3-5 December: French President Emmanuel Macron visit china