China poised to trim growth ambitions in five-year plan
China’s annual parliamentary meeting is expected to tolerate slightly slower economic growth in 2026, opening the door to greater, if not determined, efforts to curb industrial overcapacity and rebalance the export-dependent economy.
Most analysts expect Premier Li Qiang to announce a growth target of between 4.5 percent and 5 percent in his report on March 5, the first day of the meeting, and promise to increase both consumption and investment in high-tech industries.
China’s 15th five-year plan, which sets out its 2026-30 strategic goals and policies and will be announced on the same day, is expected to reaffirm this dual and contradictory goal.
“Policymakers will step up efforts to stimulate consumption while continuing to emphasize new technology-driven productive forces,” said a policy adviser who expects the target to shift to a certain range, speaking on condition of anonymity due to the sensitivity of the issue.
This dual commitment goes back decades, but Beijing has been far more successful in expanding its vast industrial complex than in its consumer sector; It has transformed China into a powerful manufacturing power that dominates strategic supply chains, giving it an advantage in increasing competition with the United States and its allies.
China’s 5 percent growth last year was achieved largely thanks to a US$1.2 trillion ($1.7 trillion) trade surplus, while domestic consumption lagged behind.
This growth model has fueled unsustainable debt, wasteful investment, deflationary pressures and industrial overcapacity.
But it is difficult for Beijing to give it up entirely at a time of rising geopolitical tensions that require greater levels of self-sufficiency in key industries such as semiconductors and aerospace, where China is still catching up with the United States.
“There is clearly tension between these two agendas, and so we will review the entire five-year plan to clarify what balance leadership will strike,” analysts at Capital Economics said in a note.
“This balance will determine how much progress will be made in combating overcapacity and deflation over the next few years.”
A more flexible growth target would give policymakers room to pursue some tough structural reforms, such as stepping up efforts launched last year to contain industrial capacity and contain price wars in various sectors.
Expectations that Beijing will set this year’s growth target at a range come after nearly two-thirds of China’s provincial governments lowered their own targets; even though in some cases this simply means shifting the expression ‘middle’ rather than ‘top’.
Guangdong, the country’s largest provincial economy, reduced its 2026 growth target to 4.5-5 percent from “around 5 percent” in 2025. Jiangsu, the second-largest economy, has set a target of 5 percent, compared to last year’s figure of “over 5 percent.”
“If confirmed, this would signal a stronger willingness among policymakers to tolerate slower but more sustainable growth rather than relying on debt-fueled investment stimulus that risks widening supply-demand imbalances,” said Michelle Lam, China Economist at Societe Generale.
Morgan Stanley analysts are among those who expect the target to remain unchanged at around 5 percent. They estimate the weighted average of provincial targets at 5.1 percent, down from 5.4 percent last year.
They said “Beijing values solidifying trust” and that the first year of the new five-year plan “is not a time to blink.”
Beijing is expected to keep the budget deficit at 4.0 percent of GDP with debt issuance plans similar to last year.
The U.S. Supreme Court’s decision in February to strike down “reciprocal tariffs” that President Donald Trump imposed in 2025, including on China, reduces the need for larger stimulus.
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