China Galaxy Strategy: Two Sessions Preview - Policy Continuation and New Changes

Economic Goals and Policy Tone: (1) Regarding this year’s main development objectives, targets will be set more pragmatically, aligning with the overall goal of “improving quality and efficiency,” while reserving policy space for structural reforms, technological innovation, and risk mitigation. (2) Macroeconomic policies are expected to remain consistent, with an emphasis on strengthening policy coordination. Fiscal policy will maintain necessary strength, with an expected optimization of expenditure structure. Key support will focus on boosting consumption, “investing in people,” and social security policies. The “dual” and “new” policy orientations will continue and be further optimized. Monetary policy is expected to maintain a “moderately easing” stance, enhancing coordination with fiscal policy. “Promoting stable economic growth and reasonable price recovery” will be important considerations for monetary policy, utilizing tools such as reserve requirement ratio cuts and interest rate reductions flexibly and efficiently. Structural monetary policy tools are expected to continue to be optimized and innovated.

Key Tasks for Economic Work: (1) Expanding domestic demand is expected to be the top priority for the year. Leading new supply with new demand, creating new demand through new supply, and promoting healthy interactions between consumption, investment, supply, and demand. On consumption, efforts include stabilizing and expanding employment through multiple channels, implementing income increase plans for urban and rural residents to enhance consumption capacity; deepening special actions to boost consumption; optimizing the implementation of the “two new” policies; and focusing on service consumption as an important lever. On investment, emphasis will be placed on leveraging government investment, optimizing its structure, increasing the share for people’s livelihood, advancing the “dual” projects, and stimulating private investment vitality. (2) Accelerate the cultivation and expansion of new drivers of growth, with a focus on achieving higher-level technological independence and self-reliance. Emphasize the role of enterprises as the main body of technological innovation, deepen reforms in the transformation mechanism of scientific and technological achievements, and establish benchmarks for innovation-led modernization. A new round of high-quality development of key industrial chains will solidify the foundation of a modern industrial system, with “AI+” becoming an important engine of new growth. (3) Deepening reforms to address “involution” competition is expected to be a key issue. (4) Resolving risks in key areas will be a continuous and normalized task. This includes stabilizing the real estate market, promoting the construction of “good houses,” and accelerating the development of new real estate models; actively and orderly resolving local government debt risks, urging local governments to proactively address debt issues, and implementing multiple measures to resolve operational risks of local government financing platforms. (5) The government work report is expected to further focus on opening-up, coordinated development, green transformation, and social security. The Fourth Session of the 14th National People’s Congress will review the draft outline of the 15th Five-Year Plan, with further attention to medium- and long-term reforms and deployments.

A-Share Market Investment Outlook: Around the “Two Sessions,” the A-share market may be driven primarily by policy catalysts, with capital competing around industry main lines and thematic opportunities guided by policies, characterized by “policy hot spots rotating and style switching rapidly.” In the medium to long term, the release of the 2026 government work report and subsequent “15th Five-Year” plan outline will outline a clear investment blueprint for the A-share market, likely supporting long-term stable market operation. Key investment opportunities include: First, the main line of improving supply-demand patterns and industry profit recovery driving the “anti-involution” concept, as well as value assets with valuation safety margins. Recent geopolitical uncertainties, such as escalating US-Iran tensions, have pulse-like positive effects on oil prices, with precious metals becoming safe-haven favorites, benefiting related sectors. Recommended sectors include non-ferrous metals (precious metals), oil and petrochemicals, basic chemicals, steel, cement, building materials, and financials. Second, the technology growth sector. As the global landscape undergoes unprecedented changes, the domestic economic logic shifts toward new productive forces, with key areas such as semiconductors, artificial intelligence, new energy, military industry, and aerospace worth attention under the “15th Five-Year” plan. Additionally, under the policy focus on expanding domestic demand, consumption themes present allocation opportunities, especially in undervalued segments with performance support.

Risk Warning: External uncertainties; policy risks falling short of expectations; market sentiment instability and ongoing liquidity adjustments.

(Source: Galaxy Securities)