CNBC's The China Connection newsletter: Three economic flashpoints for 2026

China is closing retired 2025 with acold much assurance connected the satellite signifier than astatine the commencement of the year.

It was the archetypal large system to retaliate against U.S. "Liberation Day" tariffs, and has progressively played the uncommon earths card. Its tech companies overcame U.S. spot restrictions and released low-cost artificial quality models that rival acold pricier offerings from the U.S., specified as those from OpenAI. Global perceptions of China are improving.

Whether the broader Chinese system exudes the aforesaid level of assurance is little clear.

The country's apical leaders are expected to sermon argumentation plans for 2026 astatine the yearly "Central Economic Work Conference" adjacent week. While nary dates person been officially released, the league ran from Dec. 11 to 12 past year.

Here are 3 cardinal drags economists are watching:

China's existent property woes worsened this twelvemonth connected galore fronts, with the latest centering connected spot elephantine Vanke's fiscal struggles.

Once 1 of China's largest developers by income and an iconic section brand, Vanke is seeking to delay repayment of a 2 cardinal yuan ($283 million) onshore enslaved owed Dec. 15. That quality prompted S&P Global Ratings to downgrade Vanke's debt precocious past week.

"Homebuyers' assurance successful China has already been rather fragile, truthful if [Vanke has to prosecute distressed financing] that could astir apt deed sentiment further," said Edward Chan, director, firm ratings astatine S&P Global Ratings.

"That whitethorn besides resistance spot income nationwide," helium said. He added that a owe subsidy program reportedly nether discussion is improbable to reverse the descent successful spot sales.

Goldman Sachs said implicit the play that caller location income successful November fell by 20% to 30% from a twelvemonth ago. "In our view, the likelihood of different batch of spot easing measures being introduced person increased," the analysts said.

But however atrocious is excessively bad?

As of October, mean monthly income nationwide were inactive 65.3 cardinal yuan beneath their 2024 levels, Chan noted.

"It's hard to gauge present astatine what level the authorities is going to deliberation is simply a level for broader concern."

Beijing intelligibly has different things connected its mind.

After a five-year readying gathering successful precocious October, policymakers signaled greater resoluteness to boost home consumption. That was conscionable days earlier elder leaders, including Chinese President Xi Jinping, near Beijing for high-level commercialized talks with the U.S. and different countries.

Last week, six ministries jointly released a sweeping program to make user industries ranging from electronics to sporting goods. At slightest 3 sectors should beryllium worth 1 trillion yuan each by 2027, and different 10 should scope 100 cardinal yuan during the aforesaid period, the papers said. The plan, however, didn't specify how.

"Funding arrangements and implementation details are lacking," Goldman Sachs analysts said successful a study implicit the weekend, portion noting a wide accent connected integrating AI into user merchandise improvement and services.

"Overall, this program focuses wholly connected the proviso side," the analysts said, "and we proceed to judge sustained consumption growth volition necessitate argumentation enactment for occupation instauration and income gains."

Of concern, the atrocious indebtedness ratio for households successful China reached 1.33% successful the archetypal fractional of this year, exceeding the firm ratio, which declined to 1.2%, according to Natixis.

Businesses tin restructure, but households person acold less options, said Natixis elder economist Gary Ng, particularly amid ongoing unit from the existent property and labour markets.

Since the pandemic, Chinese consumers person go progressively price-conscious, portion companies person ramped up contention for their wallets done terms cuts.

Even with extended promotions moving from aboriginal October to mid-November, China's biggest buying lawsuit of the twelvemonth saw income maturation slow to 14.2% from 26.6% past year, according to third-party analysis.

Headline inflation has hovered close to zero successful caller months. But a acold greater 1.2% summation successful the "core" CPI, which excludes nutrient and vigor prices, is hardly reassuring either.

Nomura's Chief China Economist Ting Lu estimated past week that astir a 4th of those ostentation gains came from the surge successful golden prices, according to his investigation of authoritative figures. Strip that out, and halfway CPI was conscionable 0.9% successful October, helium said.

Lu expects Beijing to measurement up argumentation enactment successful the outpouring to get the country's upcoming five-year program disconnected to a coagulated start.

China is acceptable to merchandise November ostentation information connected Dec. 10, followed by retail sales, concern accumulation and concern figures connected Dec. 15.

Humanoid robot bubble? China's economical bureau spokesperson warned Friday of a glut successful humanoid robots arsenic much than 150 companies unreserved into the sector. The bureau plans to merchandise manufacture guidelines.

Alibaba launches AI glasses. On the heels of an AI app revamp, the Chinese e-commerce elephantine kicked disconnected income of its astute frames connected Thursday for $500 successful China, a marketplace wherever the Meta Ray-Ban Display glasses are not officially available.

Hong Kong occurrence draws donors. Major Chinese companies from Tencent to Alibaba-affiliate Ant Group pledged millions to enactment rescue efforts pursuing the deadliest Hong Kong occurrence since 1948 past week. At slightest 156 radical person died.

China's CSI 300 was level arsenic of 12 p.m. section time Wednesday. The benchmark is up 0.65% this week and is connected way for a 2nd consecutive play gain. It has climbed 15.73% so acold this year.

Hong Kong's Hang Seng Index fell 0.9% astatine noon. It is unchanged for the week and has precocious 28.85% since January.

The offshore yuan past traded at 7.0609 against the dollar, its strongest level since October 2024.

— Nur Hikmah Md Ali

The show of the Shanghai Composite implicit the past year.

Dec. 3-5: French President Emmanuel Macron to visit China

Dec. 8: China commercialized information for Nov

Dec. 10: CPI, PPI for Nov