China has set its lowest economic growth target in decades, aiming for a 4.5-5% expansion in 2026 as the world’s second-largest economy grapples with weak domestic demand and an uncertain global outlook. The moderate projection follows three consecutive years of aiming for around 5% growth, which the country achieved despite a slow recovery from stringent Covid-19 controls and U.S. President Donald Trump's tariff offensive last year.
Key Takeaways
China has set its lowest economic growth target in decades at 4.5-5% for 2026, acknowledging deep-seated structural problems and global uncertainties. Premier Li Qiang highlighted challenges including weak domestic demand, deflation, and external shocks like the U.S.-Israel conflict with Iran.
- China targets 4.5-5% GDP growth in 2026, its lowest since the early 1990s
- Domestic economic struggles include property crisis, tepid consumption, and elevated youth unemployment at 16.3%
- Global uncertainties such as U.S.-Israel conflict with Iran threaten energy supplies and economic stability
- High-tech sectors like AI and robotics show promise but have not offset broader growth declines
- China plans to issue $188.5 billion in ultra-long-term special treasury bonds and allocate funds for consumer goods trade-in programs
Premier Li Qiang, China’s No. 2 official, acknowledged at the opening of the annual assembly of China’s rubber-stamp legislature, the National People’s Congress (NPC), that the domestic economy remains in the midst of deep-seated structural problems. He stated that rarely have they encountered such a grave and complex landscape where external shocks and challenges were intertwined with domestic difficulties.
The NPC will approve China's next Five-Year Plan, a policy blueprint aimed at guiding government priorities for the next few years to cement the country’s status as a global tech superpower. The meeting comes weeks before Trump’s visit to Beijing, where Chinese leader Xi Jinping is set to host him for a three-day summit covering trade, technology, and Taiwan among other issues.
China's broader growth trajectory has flattened due to a prolonged property crisis, declined investment, tepid consumption, and deflation. The 2026 target is the lowest since Beijing began announcing such figures in the early 1990s. Over the week-long meeting ahead, nearly 2,900 delegates will approve China’s next Five-Year Plan.
Despite these challenges, there are bright spots in the economy, particularly its high-tech sectors, from artificial intelligence and robotics to biomedicine. These frontier industries are also among the key aspects of the new Five-Year Plan, which stressed overcoming bottlenecks in critical core technologies and strengthening systematic planning aimed at global cutting-edge science and technology.
China has reportedly ordered the largest state oil refiners to suspend exports of diesel and gasoline amid worries that the ongoing Iran conflict could disrupt easy access to energy. The U.S. military action in Middle East has also led to concerns over whether a meeting between U.S. President Donald Trump and his Chinese counterpart Xi Jinping later this month would take place as planned.
The lowered GDP target also recognizes the seriousness of persistent domestic growth headwinds, including weak consumption and investment that have weighed heavily on growth momentum. Premier Li Qiang made a rare acknowledgement of the U.S. tariff impact during his presentation on the country's economic targets on Thursday. He also painted a stark picture of business struggles, along with persistent local government financial difficulties that have at times even led to delayed salary payments to employees.
The Chinese government pledged to create 12 million urban jobs with an urban jobless rate at 'around 5.5%.'. Despite a persistent downward spiral in the property market, Beijing plans aimed at arresting the decline in the sector were similar to those detailed last year — and Thursday's work report even labeled those efforts as 'effective.' Meanwhile, policymakers continued to double down on achieving tech self-sufficiency.
Exports growth remains a main swing factor. If exports remain strong, policymakers may continue to tolerate weak domestic consumption. Conversely, if exports falter, they will step up domestic stimulus to defend the GDP target.
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