Fearless of External Volatility! JPMorgan Chase's Zhu Feng: Policy Support + Internal and External Coordination, China's Economy Moves Steadily Forward in 2026

Recently, JPMorgan China’s Chief Economist and Head of Greater China Economic Research Zhu Feng was interviewed exclusively by Securities Times. He shared his latest insights on market hot topics such as the 2026 government work report, the 14th Five-Year Plan outline, and the recent impact of international geopolitical conflicts on the economy.

Zhu Feng believes that this year’s GDP growth target is set at a range of 4.5% to 5%, which more accurately reflects the characteristics of the economic transition phase and leaves greater policy flexibility. While external demand remains an important growth engine, expanding domestic demand has been the primary focus of the government work report for two consecutive years, indicating a deepening understanding of domestic demand, especially consumption.

Regarding the recent fluctuations in international oil prices triggered by the US-Iran conflict, he notes that the direct impact on China is limited. However, attention should be paid to the rapid rise in energy prices, which could suppress global economic growth and cause a “second-round impact” on China’s external demand.

Effective investment and exports are expected to support economic growth, with consumption policies awaiting further breakthroughs

This year’s government work report states that by 2026, the economy should grow by 4.5% to 5%, with efforts to achieve better results in practice. Zhu Feng interprets this as a downward adjustment from last year’s target, aligning with China’s current economic reality and providing more policy space and flexibility. He points out that China is in a transitional phase, often accompanied by slower growth, and this range reflects an important judgment and adjustment of the economic features during this period.

For the economic growth engine in 2026, Zhu Feng judges that external demand may still be the main driver. The overall policy measures introduced have not significantly increased in strength, but there remains potential for further efforts depending on economic conditions. Currently, consumption is unlikely to be the core driving force.

Zhu Feng observes that the momentum of effective investment has already begun to show in data, becoming an important tool for stabilizing growth. He highlights that recent data show significant improvements in infrastructure investment, especially in areas related to the 14th Five-Year Plan and key projects mentioned in the government work report. Overall, he believes that effective investment and exports will provide certain support for China’s economy this year, helping to underpin growth.

He also notes that a highlight of the 2026 government work report is the emphasis on domestic demand, particularly consumption, which has been the primary focus for two consecutive years. In an increasingly complex and severe external environment, exports may continue to serve as a growth engine, but boosting consumption remains an important and long-term task. The continued prioritization of domestic demand and related policies indicate the government’s clear understanding of the international and domestic economic situations, with expanding consumption remaining a key policy focus.

Regarding fiscal policy, Zhu Feng states that this year’s expansionary fiscal deficit continues to tilt toward investment, including projects at the start of the 14th Five-Year Plan and the latest investment data, reflecting a focus on the supply side and government-led initiatives. He explains that government policies tend to favor supply-side efforts, which are easier to implement and can produce immediate effects. However, boosting consumption still faces significant challenges. Specific measures such as the 250 billion yuan in old-for-new vehicle replacement funds and 100 billion yuan in fiscal coordination funds can have short-term effects, but markets are still looking forward to more substantial fiscal policies and supporting measures in the consumption sector.

Domestic demand’s importance rises, risk prevention shifts backward

Zhu Feng told Securities Times that compared to last year’s government work report, an important improvement is the deepening recognition and emphasis on domestic demand, especially consumption and effective investment. He points out that this year’s report focuses on growth, transformation, domestic demand, and technology, aiming to leverage China’s large consumer market through building a unified national market. Removing barriers within the domestic market is not only a key step to prevent internal competition but also positively impacts consumption.

Another highlight is the increased focus on balancing international trade. Zhu Feng states that this reflects the government’s full awareness of rapid changes in the international environment. Amid trade pressures and uncertainties, expanding domestic demand and strengthening trade balance can help mitigate external pressures from trade frictions and support long-term stable economic growth.

He also emphasizes a change in the ranking of risk prevention in the government work report. Previously, risk prevention was ranked sixth with a strict tone emphasizing the prevention of systemic risks. This time, it has been moved to the tenth position with a more moderate tone, focusing more on risk prevention and safety capacity building in key areas. He considers this adjustment significant—strict language and rigid requirements in risk management previously limited policy space for promoting growth and consumption. The lower ranking now creates more room and flexibility for policies aimed at boosting consumption and effective investment.

“Ultimately, to address downward pressure, we still need to rely on economic growth. Rapid growth can help resolve many risks and create favorable conditions for governance and restructuring,” Zhu Feng summarized. From global experience, including China, many crises in finance and real estate sectors have been absorbed during periods of rapid growth. Growth can accelerate and improve quality, while risk prevention remains an essential safeguard.

Since 2025, international investors have paid close attention to the effectiveness of the “anti-involution” policies. Zhu Feng states that these policies have already shown initial results, with recent improvements seen in data such as PPI and CPI, especially in certain industries. For example, measures targeting platform economies last year were timely and effective, with room for further optimization.

He notes that this round of “anti-involution” differs significantly from the supply-side reform in 2015. The 2015 reforms focused on supply-side adjustments, while this time, the approach considers both demand and supply sides. The previous reforms targeted traditional mature industries like steel and coal, whereas this round also involves emerging sectors such as platform economy, electric vehicles, and photovoltaics, which are highly valued and have promising prospects. Zhu Feng also points out that many current industry issues stem from weak demand.

Oil price fluctuations have limited direct impact on China

Recently, escalating US-Iran tensions have caused rapid increases in international oil prices. Zhu Feng believes that the impact of recent geopolitical developments on China mainly manifests in two aspects: trade uncertainties and shocks to the supply of key commodities due to geopolitical changes.

He analyzes that the US Supreme Court’s February ruling on IEEPA tariffs was favorable for China’s exports and trade negotiations with the US, lowering US tariffs on China relative to other countries. Data from January and February show a significant increase in China’s exports to the US.

Regarding the recent high oil prices, Zhu Feng states that since China’s energy structure mainly relies on coal, new energy, and nuclear power, and given diversified sources of oil and gas, the direct impact on China is limited. Historical data suggest that a $10 per barrel increase in oil prices transmits approximately 0.1 percentage points to consumer prices, a relatively low figure thanks to the stability provided by state-owned oil companies and related policies.

However, he also warns that in the medium to long term, sustained high energy prices could pose two potential shocks: one to consumer and producer prices, squeezing household consumption and increasing corporate costs, thus slowing economic growth; and a “second-round impact,” where rising oil prices quickly transmit to large economies like the US and EU, raising prices and restraining growth, which could weaken China’s external demand.

On oil price trends, Zhu Feng states, “Morgan Stanley’s current view is that if Brent crude remains around $100 per barrel through mid-year and gradually declines to $80 in Q3 and Q4, we estimate global inflation could rise by 0.8 percentage points this year, which would suppress global consumption and production, reducing global GDP growth by 0.6 percentage points.”

He adds that the global economy remains resilient, and a recession this year is unlikely. Especially in the US and other economies, particularly in high-tech sectors, Q1 performance has been strong. Even if subsequent quarters see slower growth, the annual outlook remains positive.

Regarding policy responses, Zhu Feng notes that most central banks worldwide are currently in a wait-and-see mode. The Federal Reserve may tighten monetary policy if inflation accelerates, possibly delaying the expected rate cuts in June, which could influence economic trajectories. However, he remains confident in China’s policy response capabilities. Although monetary policy space is limited, fiscal policy still has room to act more effectively to counter external shocks.

Layout: Liu Junyu

Proofreading: Zhu Tianting