Facing ‘grave and complex landscape,’ China sets lowest economic growth target in decades
Facing ‘grave and complex landscape,’ China sets lowest economic growth target in decades
Thursday marked the announcement of China’s most subdued GDP forecast in over three decades, with officials projecting expansion of 4.5-5% for 2026. The second-largest economy is navigating sluggish internal demand and a volatile global environment, prompting a reduction in its growth aspiration. This follows three years of targeting “around 5%” growth from 2023 to 2025, which China managed to achieve despite prolonged recovery from pandemic restrictions and the previous US tariff campaign.
The economy’s broader expansion has stalled, influenced by a persistent property downturn, reduced investment, weak consumer activity, and deflationary pressures. Premier Li Qiang, the nation’s second-highest leader, opened the annual National People’s Congress (NPC) session by emphasizing the resilience of China’s economy amid adversity. “Rarely in many years have we faced such a severe and multifaceted situation,” he stated, noting the intertwined global and domestic challenges.
Five-Year Plan and Global Diplomacy
Over the course of the week-long NPC gathering, nearly 2,900 delegates will endorse China’s upcoming “Five-Year Plan,” a strategic roadmap intended to reinforce the country’s position as a global technology leader. The meeting occurs shortly before Trump’s visit to Beijing, where Xi Jinping will host a three-day summit on trade, technology, and Taiwan. This aligns with the administration’s effort to address lingering economic tensions after a recent truce in October.
China’s economic reforms, initiated in the 1970s, spurred nearly three decades of robust growth, surpassing Japan in 2010. However, the momentum has waned in recent years, accelerated by stringent pandemic measures. Meanwhile, India has emerged as the fastest-growing major economy, surpassing China in some metrics. As the US-led conflict in the Middle East continues, China’s leaders are reinforcing an image of stability and endurance.
“Over the past year, the Chinese economy has proved remarkably resilient, forging ahead against headwinds,” Premier Li Qiang said at the NPC’s opening. His remarks underscored the government’s recognition of “deep-seated structural problems” within the domestic market, a shift from prior optimism.
Trade Strategy and Domestic Challenges
Amid the trade disputes, China maintained its stance, implementing retaliatory tariffs and export controls on rare earth minerals. Despite these measures, the country recorded a record trade surplus last year by diversifying its export destinations. The US Supreme Court’s recent decision to overturn Trump’s tariff authority further validated China’s patient approach, easing the effective tax burden on its goods to levels comparable to other nations.
Helen Chiao, Bank of America’s chief Greater China economist, observed that the moderate growth target reflects a strategic pivot toward sustainable development. “Policymakers are signaling a transition from high-speed to high-quality growth,” she noted. “This also suggests they may be preparing for prolonged domestic demand struggles, which have proven difficult to resolve.”
For the first time in three decades, investment in key sectors like housing, manufacturing, and infrastructure declined last year. The property crisis, now in its fifth year, continues to drag on economic performance, undermining consumer confidence and spending. These challenges are driving the government’s decision to set a more conservative growth benchmark, even as it seeks to balance global and domestic priorities.
