ab 23 March 2026Global Research
China Economic Perspectives
Takeaways from UBS China Macro Day
UBS China Macro Day
UBS hosted a China Macro Day on 17–18 March in Beijing. The event featured 10 senior
experts. We summarize key findings below.
President Trump’s delayed visit to China
President Trump’s planned trip to China remains on the table, even though it has been
confirmed to be delayed by roughly a month. Potential topics for the upcoming visit
could include: purchases of airplanes, soybeans and other agriculture products, oil and
gas (though one expert noted it would depend on relative prices), cooperation on
fentanyl controls, and easing restrictions on rare earth exports. The new 301
investigation could become another source of discussion, with some of the experts
anticipating potential additional tariffs. Meanwhile, the experts believe China may
request relaxing export controls for high-end chips. Beyond the upcoming visit itself, the
experts believe the US is primarily seeking stability in US-China relations.
China’s relationship with the EU and Japan
The experts hold mixed views. Despite the recent visits by foreign officials, some of the
experts believe China-EU relations to be more nuanced than they have appeared. They
believe that China’s geopolitical stance and its strong export competitiveness have not
necessarily been viewed positively by Europe, while some also argue that China-Japan
relations appear to be at a deeper impasse than previous episodes. However, other
experts take a more constructive view and believe Europe and China will adopt a
pragmatic approach and maintain a functioning working relationship. China appears
willing to set up production facilities in Europe if labour costs are reasonable, especially
in sectors where China has a technology edge, such as EVs, solar or lithium batteries.
China can also increase imports to reduce trade imbalance. Some of the experts noted
that they believe trade relations with Japan are not affected by politics as much as they
may appear and the China-Japan relationship could improve in the longer term.
Export growth to slow from the strong Jan-Feb reading
Experts believe the exceptionally strong Jan-Feb export growth was boosted by the one-
year tariff postponement, some front-loading, and CNY effect. The March-April
readings will likely normalize (UBS expect March exports to decline YoY). The future
trajectory of China’s exports will depend on US-China trade talks and how the Middle
East conflict evolves. The strong export growth to Africa (26% in 2025) is likely to slow,
while Latin America may be the next growth driver. Export tax rebates are under
persistent pressure to be adjusted down. External pressures could lead to partial or
category-specific adjustments, but changes are likely gradual. Overall, experts expect
exports to secure a decent 4-5% growth in 2026.
Mixed views on whether domestic activities will rebound in 2026
Some experts believe China’s industrial utilization rate has been recovering since Q3
2024, driven by better demand and slower supply growth. With property activities
entering their last year of downturn, the rebound of manufacturing investment should
lift the economy and PPI out of deflation. Consumption recovery is set to follow, as wage
growth of listed companies has bottomed out (4% in 2025 vs 2% in 2024) and
household net worth turned upward last year (in other words, household income and
equity market's rally more than offset the loss from the negative wealth effect from
housing). Other experts point out that China still faces insufficient demand, primarily
reflected in weak consumption, driven by the significant role of the state and high
national saving. They argue that the most important policy should focus on boosting
end demand by increasing the payout level of urban-rural resident pensions, targeting
This report has been prepared by UBS Securities Asia Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES,
including information on the Quantitative Research Review published by UBS, begin on page 3.
Economics
China
Yu Song
Economist
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+86-10-5832 8508
Jennifer Zhong
Economist
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@
+86-105-832 8324
Grace Wang
Economist
S1460524050003
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William Deng
Economist
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+852-2971 6765
China Economic Perspectives 23 March 2026 ab 2
low-income rural residents. Multiple experts believe the property downturn may take
longer (at least through 2026), and any subsequent rebound will likely be structural
rather than broad-based. Some experts expect infrastructure investment to recover in
H226 when major projects from the 15th FYP start. Interestingly, experts expressed
different interpretations of the government’s “-5%” growth target for 2026. Some
believe the government will be content if GDP growth falls within the range, while
others believe it still aims for around 5% but wants leeway amid the property downturn,
external uncertainties, concerns about excess investment if fiscal expansion is too
strong, and potential data issues. Many experts indicated they believe the RMB is
undervalued, with some seeing USDCNY ending 2026 at (a 5-6% appreciation).
A consensus view that China will exit deflation in 2026
Most of the experts expect China’s deflation to end in 2026, but their rationale differs.
Some attributed the change to demand recovery on the back of pro-growth policies in
the past 2-3 years, improving inflationary expectations, and a rise in PPI. Others believe
the current deflation environment will serve as the right time window to reform utility
prices (. residential water/electricity tariffs or subway fares). Overall, with
consumption only recovering from a low base, some experts point out that any recovery
is likely modest and expect CPI to recover only to -1% in 2026 (vs 0% in 2025).
Expectation for policies
� On fiscal policies, experts note that the general fiscal deficit and issuance of
special CGBs/special LGBs were kept unchanged because the growth target was
lowered. That said, broad fiscal support is larger when accounting for quasi-fiscal
spending through policy banks, PBoC’s structural tools, government funds, and/or
SOEs. Other experts believe the central government is concerned with fiscal
sustainability given sizable local government debt.
� On monetary policy, some experts believe the PBoC may be reluctant to cut
policy rates, especially if real rates drop rapidly when inflation rises. They think
deposit rates are unlikely to move down further. Other experts still expect the
PBoC to cut, especially after potential Fed cuts in H2, considering real rates are still
elevated. That said, the size is likely modest and the PBoC may explore structural
tools instead. Others expect the PBoC to cut further and note that capital injection
should help banks coping with narrowing NIM. Rate cuts could potentially push
banks to expand fee-generating services.
� On consumption policy, most experts indicated that they agree additional
policies seem to be modest in 2026. Some cite the government’s plan to increase
household income, potentially raising civil servant wages. Other experts believe
there’s room to expand service consumption by easing regulations and relaxing
market access (. hospitals, schools, high-end auto/yacht services).
� On property policies, anticipation of major easing is limited. In fact, policy
support is expected to scale back if property sales show signs of recovery, which
has been the case recently (see high frequency tracker). Some experts note the
existing bottlenecks with property destocking.
� On reforms, many experts believe China may need to broaden fiscal sources of
local government. One possible way is through imposing a wealth tax, which
might enhance local governments’ incentives to protect private property and
support private sector. That said, it seems expectations on major reform measures
in 2026 is low.
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China Economic Perspectives 23 March 2026 ab 3
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