China dials down growth ambitions with decades-low target. Here’s why
A Chinese People’s Liberation Army (PLA) soldier stands guard outside the National Museum of China in Beijing on March 3, 2025, ahead of the country’s annual legislative meetings known as the “Two Sessions.”
Pedro Pardo | Afp | Getty Images
While China has set the lowest growth target in decades, acknowledging domestic challenges and noting global uncertainty, it has implemented some stimulus measures against a possible increase in external shocks.
Beijing on Thursday announced its 2026 GDP growth target of 4.5% to 5%; This is the least ambitious target since the early 1990s.
Danyang Shen, head of the team that prepared the target-setting report, told reporters on Thursday that the low target range leaves policymakers room to “react to the external environment of increased uncertainty this year,” according to CNBC’s Chinese translation.
“The number of uncertain and difficult-to-predict factors may be greater than anticipated,” he said, noting that “everyone has seen the latest global trend.”
With 2026 just three months away, Beijing faces increasing economic risks as the US-Israeli conflict with Iran, a critical oil supplier to China, puts Beijing’s energy supplies at risk. This situation comes with the overthrow of Nicolás Maduro in Venezuela, another major oil supplier to China.
there is china reportedly He ordered the state’s largest oil refineries to suspend diesel and gasoline exports over concerns that the ongoing conflict in Iran could disrupt easy access to energy. US military action in the Middle East has raised concerns about whether the meeting between US President Donald Trump and his Chinese counterpart Xi Jinping later this month will take place as planned.
The lowered GDP target also recognizes the severity of continuing headwinds to domestic growth.
Chinese Premier Li Qiang made a rare admission about the impact of U.S. tariffs during his presentation of the country’s economic goals on Thursday. It also painted a stark picture of local government financial difficulties as well as struggles in the business world, which at times led to delayed payments of salaries to employees.
Han Shen Lin, China country director at The Asia Group, said the report was “surprisingly frank” and that weak consumption and investment were weighing heavily on growth momentum.
But Lin said it was “ultimately a matter of confidence in the future.” “Nothing in the plan really addresses this concern, so the market takeaway will be ‘more deflation on the horizon.'” Chinese consumer prices remained stable last year compared to the growth target of “around 2%”.
Although Beijing lowered its overall GDP target range, it kept other targets such as consumer inflation and fiscal spending broadly in line with last year, when targeted economic growth was around 5%.
“I think people already think the economy isn’t growing [at] “5%,” said Liqian Ren, manager of Mordern Alpha at US-based fund manager WisdomTree. Lowering the GDP target “will probably bring it closer to what people are feeling on the ground.”
“Ordinary people care most about the unemployment situation,” he said. Youth unemployment rate in China remained highThe unemployment rate, which was at 16.3% in January, was at an average of 5.2% last year. For comparison, the youth unemployment rate was: 9% in the USA In January.
The Chinese government on Thursday pledged to create 12 million urban jobs, where the urban unemployment rate is “around 5.5%.” He did not share specific plans for doing so.
Technology, not real estate
Despite the persistent decline in the real estate market, Beijing’s plans to stem the sector’s decline were similar to those detailed last year, and Thursday’s labor report even described the efforts as “effective.”
Meanwhile, policymakers continued to double down on achieving technology self-sufficiency. Over the next five years, Beijing said it would increase investment in scientific research and improve the environment to make it more conducive to innovation.
So far, attempts at high-tech industries have not been successful. offset growth drifts. New industries such as artificial intelligence, robotics and electric cars added just 0.8 percentage points to GDP from 2023 to 2025, according to research firm Rhodium Group. Meanwhile, traditional sectors, including real estate, recorded an overall decline of 6 percentage points over the same period.
Minimum level for growth
Macquarie’s head of China economics, Larry Hu, said the increase in exports remained a “key impact factor”. “If exports remain strong, policymakers may continue to tolerate weak domestic consumption. Conversely, if exports fall, they will increase domestic stimulus to defend the GDP target.”
China plans to issue 1.3 trillion yuan ($188.5 billion) of ultra-long-term special treasury bills in 2026, as last year, and allocate 250 billion yuan to support its consumer goods swap program, up from 300 billion yuan last year.
“This shows a clear shift from Beijing’s crisis response stimulus to maintaining policy space for 2027-2030,” said Jeremy Stevens, Standard Bank’s Beijing-based Asia economist.
However, the modest growth target will keep the world’s second-largest economy on track to meet its goal of doubling 2020 levels by 2035, according to Beijing’s long-term targets. Shen estimated that to meet the 2035 target, China’s economy would need to grow at an average annual rate of 4.17% over the next decade.
Lin of the Asia Group said China’s leaders would “prefer to pass a modest figure rather than miss a bold figure.”
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