Government Work Report: What new ideas are there in the first year?

As the government work report for the first year of the 14th Five-Year Plan, this year's economic work ideas have a different perspective from the past, which is to plan for the Chinese economy in the long term and push for economic transformation with greater determination. Based on this perspective, our demand for quantity has been somewhat diminished, while the requirements for quality have become more pronounced.

From an international perspective, the new requirement in economic and social development is to "coordinate the two overall situations of domestic and international," aiming to stabilize the external economic environment under the guidance of a new round of diplomatic engagement by heads of state; from a domestic perspective, the economic growth target for the starting year is aligned with the overall vision target for 2035, leaving space for structural adjustment, risk prevention, and reform promotion, thus laying a solid foundation for better development in the later stages. Specifically, some new changes are worth noting:

First, the growth target has shifted to a range, providing the clearest signal from "quantity" to "quality." The adjustment from the previous "around 5%" to "4.5%-5%" indicates that by accepting a phased slowdown in growth, space is created for high-quality development and structural reforms, allowing the economic growth rate to be closer to the potential growth level. Through the target for the deficit ratio, we estimate the implied GDP deflator index behind it to be 0-0.5%, which is an improvement compared to last year, indicating a higher demand for "price" in 2026.

Second, the layout changes of major projects also reflect the weight of "quality." Compared to the 13th Five-Year Plan, the proportion of new quality productivity projects in the list of major projects for the 14th Five-Year Plan, focusing on cultivating new industries and new tracks, as well as tackling cutting-edge technologies, has significantly increased, becoming a hard-core support for "improving quality and efficiency."

At the same time, the proportion of livelihood projects is also relatively high, reflecting the development logic centered on people's livelihoods; green and low-carbon projects are steadily increasing, and considering that the quantitative targets for carbon emissions during the 14th Five-Year Plan period have not been significantly lowered, green and low-carbon remains a key direction during this period, laying a solid foundation for achieving the carbon peak target before 2030.

Third, the acceleration of industrial deployment may proceed along two main lines of "stock optimization" and "incremental breakthroughs." Traditional industries focus on "renewal and quality improvement," tapping potential through equipment upgrades and digital transformation; future industries focus on "seizing high points," opening up scenarios and patiently cultivating new tracks, with a focus on future energy, quantum technology, embodied intelligence, brain-computer interfaces, 6G, and other cutting-edge fields.

Fourth, improving people's livelihoods solidifies the sense of growth. Compared to the Central Economic Work Conference in December last year, the order of "increasing the guarantee and improvement of people's livelihoods" has been moved forward, replacing green development as a higher priority work arrangement. Promoting high-quality and full employment, enhancing the quality of education, and strengthening medical and health services have become key areas of focus for people's livelihoods The people-oriented approach is highly aligned with the "correct view of achievements." The core of the correct view of achievements lies in "achieving results for the people and achieving results through practical work," ultimately focusing on the sense of gain and happiness of the masses. "Deepening the welfare of the people is of special significance for starting well and taking a good step on the grand journey of the 14th Five-Year Plan." Under the guidance of the correct view of achievements, supporting the height of development with the warmth of people's livelihoods is the most solid foundation for the start of the 14th Five-Year Plan.

Under the requirement of "quality," the coordination between monetary and fiscal policies has become increasingly crucial. The monetary policy continues to maintain a moderately loose overall tone, supporting credit expansion and financing for the real economy through reserve requirement ratio cuts, interest rate reductions, and maintaining reasonable liquidity, along with precise structural tools. However, the transformation of monetary easing into effective credit still relies on supportive measures on the demand side; relying solely on monetary policy is insufficient for sustained and effective credit expansion. Therefore, promoting the coordination of fiscal and monetary policies and enhancing the overall effectiveness of macroeconomic regulation become the top priority in the next stage.

Which comes first, monetary easing or fiscal efforts? Strengthening the coordination of fiscal and monetary policies hinges on clarifying their positioning and division of labor: Monetary policy focuses on indirect guidance and creating a suitable financial environment, while fiscal policy directly stimulates effective demand and activates the vitality of micro entities. The coordination of the two means that macroeconomic regulation will emphasize a pattern where fiscal policy leads and monetary policy supports, with monetary policy playing a more supportive and supplementary role to fiscal policy, rather than preceding or replacing it. Through precise matching in both total and structural aspects, a policy synergy is formed to jointly promote the "quality and efficiency improvement" of the macro economy.

The leading role of fiscal policy centers on "investing in people." Although this year's fiscal deficit target remains around 4%, the arrangement of fiscal funds shows "greater emphasis on supporting consumption, investing in people, and ensuring people's livelihoods."

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