Deflation and tariff-hit China reportedly sets lowest growth target on record at 4.5% to 5%
China’s president and center, Xi Jinping, attends the opening session of the Chinese People’s Political Consultative Conference (CPPCC) at the Great Hall of the People in Beijing, China, on Wednesday, March 4, 2026.
Qilai Shen | Bloomberg | Getty Images
China on Thursday set its GDP growth target for 2026 at 4.5 percent to 5 percent, Reuters reported; This is the lowest target on record.
That target marks a decline from the “about 5%” level set in the past three years, excluding 2020 when Beijing did not set a growth target due to the pandemic, and the most modest target yet for the world’s second-largest economy.
Beijing also reportedly left its budget deficit target unchanged from last year’s level of “about 4%” of GDP, as the National People’s Congress, the country’s top legislative body, holds its annual meeting this week.
The 4% budget deficit target, first set in 2024, is the highest on record dating back to 2010, according to data accessed via Wind Information. The previous high was 3.6% in 2020.
Chinese policymakers also kept the annual consumer inflation target steady at “around 2 percent,” according to Reuters. This level, first set for 2025, is the lowest in more than two decades and signals Beijing’s tacit acceptance of lackluster domestic demand.
The inflation target serves as a ceiling rather than a target to be achieved. Due to weak consumer confidence, the price increase remained stable throughout 2025 and was 0.7% when food and energy prices were excluded.
China plans to issue 1.3 trillion yuan ($188.47 billion) of ultra-long-term special treasury bills in 2026, the same as last year, and allocates 250 billion yuan to support its consumer goods swap program, Reuters reported.
“The growth target is quite realistic. This means a shift from a ‘numbers first’ mentality to a ‘quality first’ mentality,” said Tianchen Xu, senior economist at the Economist Intelligence Unit.
“Beijing does not necessarily view high growth rates as a good thing because it could encourage local officials to exaggerate growth,” Xu said.
He added that the relatively modest fiscal stimulus was also consistent with the more conservative growth target.
China also reportedly aims to keep the urban unemployment rate at around 5.5 percent this year, down from 5.2 percent last year, and added 12 million new jobs in urban areas.
The country’s annual parliamentary meeting, known as the “Two Sessions”, began on Wednesday with the opening ceremony of the Chinese People’s Political Consultative Conference, a high-level policy advisory body.
The NPC began its meeting on Thursday and is expected to wrap up its annual session on March 12. The foreign minister and the heads of various economic departments will meanwhile hold press conferences.
While China’s economy grew by 5% last year, the country entered its fourth year of deflation due to a decline in real estate, weak consumer confidence and local government debt stress. Retail sales rose 3.6% in 2025 and fell 2.6% from the previous year, as factory-gate deflation deepened.
Fixed asset investment fell by 3.8% last year; the first annual decline in decades. The real estate shortage deepened as investments in the sector decreased by 17.2%.
