Standard Chartered's Greater China and North Asia Chief Economist, Ding Shuang, recently shared insights on the global and Chinese economic outlook for 2026. He highlighted that while the global economy is expected to maintain moderate expansion, it will face multiple risks and challenges. Meanwhile, China's economic focus is shifting from short-term "risk management" to long-term productivity-driven transformation.
**Global Economic Expansion** Ding projected that global growth in 2026 will remain steady at around 3.4%, similar to 2025's forecast. The resilience in 2025 was attributed to strong global trade (partly due to front-loaded exports), easing inflation, accommodative monetary policies from central bank rate cuts, and wealth effects from equity markets boosting consumption. However, growth drivers in 2026 may shift, with trade momentum slowing as export front-loading fades. Consumption is expected to show a "K-shaped" divergence—strengthening for high-income groups benefiting from asset appreciation but weakening for lower-income households facing limited wage growth and lingering inflation pressures.
Investment, particularly in AI and semiconductors, is likely to become a key growth driver. Fiscal policy will also take precedence over monetary easing, with major economies like the U.S. and Germany expected to increase public spending.
**U.S. Economy and Fed Policy** Standard Chartered forecasts U.S. growth to accelerate from 2.0% in 2025 to 2.3% in 2026, supported by business investment, potential tax cuts, and AI advancements. However, labor market weakness may persist in early 2026 before improving. The bank expects limited Fed rate cuts in 2026, diverging from market expectations of 55 bps in reductions. This could push 10-year Treasury yields to ~4.6% and strengthen the USD.
**Europe and Risks Ahead** Eurozone growth is projected to slow from 1.4% in 2025 to 1.1% in 2026 due to trade pressures and lagging AI investment, though recession risks are low. Ding warned of geopolitical tensions, trade policy uncertainty, U.S. political risks, and potential financial bubbles in AI/crypto as key threats.
**China’s Transition to Long-Term Reforms** China’s 2026 GDP growth is forecast at 4.6%, aligning with its potential rate and 2035 goals. The economy will pivot toward domestic demand and innovation: - **Exports**: Growth may slow as front-loading effects fade, with trade frictions likely. - **Consumption**: Services demand stays stable, while goods consumption could moderate. - **Investment**: Fiscal-backed infrastructure and manufacturing recovery may offset persistent property sector drags.
Macro policies will remain supportive but not overly expansive, with fiscal deficits easing slightly to 8.5% of GDP. Monetary easing will be limited—a symbolic 10 bps rate cut in Q2 and a 25 bps RRR reduction in Q1.
**"Strong RMB Policy" Takes Shape** China’s emphasis on a "strong currency" as a pillar of its financial power strategy signals a formalized "strong RMB policy." This aims to elevate the yuan’s global role through: 1. **Economic fundamentals**: Productivity gains via innovation. 2. **Policy credibility**: Prudent macro policies to preserve purchasing power. 3. **Ecosystem development**: Expanding RMB usage in trade/investment and building alternative payment systems.
Standard Chartered anticipates faster RMB internationalization, contingent on capital account reforms.
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