Bold takeaway: China sticks to a cautious growth path, signaling continuity in policy even as it trims its GDP target and faces domestic headwinds and global uncertainties. But here's where it gets controversial: will incremental steps be enough to revive demand without triggering bigger, riskier stimulus?
China’s leadership signaled steadiness rather than a major policy pivot in its latest economic update, revealing a slightly lower target for gross domestic product growth this year amid a prolonged property slump and other domestic challenges, along with growing external uncertainty.
Premier Li Qiang unveiled a target range of 4.5% to 5% for annual growth in his report to the opening session of the National People’s Congress. This sits below last year’s 5% actual growth and is softer than the roughly 5% target set in each of the previous three years.
“While recognizing our achievements, we are also clear-eyed about the difficulties and challenges we face,” Li stated, delivering much of the 35-page report during a speech that lasted longer than an hour.
China’s policymakers are trying to balance two big ambitions: jump-start a cooling economy by encouraging domestic consumption while advancing Xi Jinping’s broader goal of transforming China into a global leader in AI, robotics, and other advanced technologies. The plan—consistent with recent years—emphasizes supporting domestic demand without rolling out major new stimulus to spur growth in the near term.
In its 2026 draft budget, the government also trimmed the pace of defense spending growth to 7%, down from 7.2% last year. The Congress, which largely endorses the policies set by the Communist Party, is expected to approve the annual report and budget at its closing session next week.
Beyond the economy, China faces external pressures from tariff disputes and geopolitical tensions. The country remains heavily dependent on Middle East oil and gas, and regional conflicts have driven up energy prices and threatened supply chains.
The economy has also contended with shifting trade dynamics. The report notes that free trade is under significant threat amid rising geopolitical risks. While China’s exports to the United States have faced tariffs, the country has expanded exports to other regions around the world.
Domestically, the report highlights an “acute” imbalance between strong supply and weak domestic demand, alongside the challenge of steering the economy toward new engines of growth.
“At home, we still face quite a few problems and challenges, both old and new,” the report acknowledged.
This year’s legislative gathering, with nearly 3,000 delegates, will also endorse a five-year plan outlining policy priorities through 2030.
Setting a growth range of 4.5% to 5% gives the government room to adjust policies as the year unfolds, while the plan also notes the aim to “strive for better in practice.”
“In proposing these targets, we have considered the need to leave some room for structural adjustments, risk prevention, and reform in the opening year of this five-year plan period, so as to lay a solid foundation for delivering better performance in the coming years,” the report stated.
AP Writer Huizhong Wu contributed.
