On November 13, the 20th Citi China Conference was held in Shanghai. Yu Xiangrong, Chief Economist for Greater China at Citi Group, stated that the "15th Five-Year Plan Proposal" adopted at the Fourth Plenary Session of the 20th Central Committee provides a "new script" for China's economy, with two main themes: "technological self-reliance" and "supply-demand rebalancing."
Yu noted that against the backdrop of accelerating geopolitical shifts, prioritizing the development of new productive forces and emphasizing technological self-reliance aligns with market expectations and will drive future economic growth. He highlighted that the more significant policy shift lies in pragmatically advancing economic rebalancing—focusing on deepening the national unified market on the supply side to avoid cutthroat competition, while aiming for a "noticeable increase" in household consumption rates and a more sustainable social security system on the demand side.
Regarding macroeconomic trends, Yu holds a constructive view of China's economy. He revealed that Citi had already raised its 2025 GDP growth forecast to 5% in June, with the first three quarters achieving 5.2% growth. "Now I’m more confident that the annual 5% target is attainable." He expects the growth target for 2026, the first year of the 15th Five-Year Plan, to remain at "around 5%."
On monetary policy, Yu anticipates no reserve requirement ratio (RRR) or interest rate cuts this year but projects a 20-basis-point rate cut and a 50-basis-point RRR reduction in 2026. "Modest cuts would mainly serve as a signal of continued accommodative policy, with limited practical impact." He pointed out that banks' net interest margins have fallen to a historic low of 1.4%, now below non-performing loan ratios, constraining further monetary easing.
As for exchange rates, Yu expects the RMB to experience greater volatility with an appreciation trend. "Factors such as purchasing power parity, widening trade surpluses, narrowing China-U.S. interest rate differentials, and net cross-border capital inflows are forming expectations for RMB appreciation. The 7 level may become a testing point for the USD/CNY exchange rate."