China has set a growth target for GDP this year of between 4.5 and 5 per cent, the lowest range in decades, and maintained a higher fiscal deficit as leaders warned of growing “difficulties and challenges” in the economy.
Announcing national economic targets for 2026, China’s Premier Li Qiang also said on Thursday that defence spending would rise 7 per cent this year, slightly lower than 7.2 per cent a year ago but still significantly outpacing overall fiscal expenditure as he warned against Taiwan “independence”.
The figures were released at the opening of the annual session of China’s rubber-stamp parliament in Beijing.
The GDP target, contained in the government’s “work report”, which lays out its goals for the year, represents a modest step down from last year’s goal of “around 5 per cent” and the actual growth of 5 per cent during 2025.
“Geopolitical risks are rising. Global economic momentum remains sluggish, while multilateralism and free trade are under severe threat,” said Li, reading the report in the Great Hall of the People before President Xi Jinping and thousands of delegates from across China.
On the home front, he acknowledged that the property market, which is in a deep downturn, was still “in a period of adjustment”, “the imbalance between strong supply and weak demand is acute” and it was “more challenging for people to secure employment and earn more”.
But he said that over the past year the economy had “proved remarkably resilient”, with China able to diversify its exports and increase spending on research and development.
China is aiming for global technological supremacy in its next five-year plan, which was also formally released on Wednesday.
It calls for “decisive breakthroughs” in cutting-edge technologies, with Beijing wanting to build the entire chip supply chain domestically. It also proposes expanding national computing capacity, including large AI computing clusters and a nationwide computing infrastructure linking data centres across the country.
But the country faces severe challenges from a domestic slowdown in its own economy and deteriorating global conditions arising from US President Donald Trump’s trade war and attack on Iran.
“The wider [GDP growth] band provides greater policy flexibility to navigate domestic and external uncertainties,” said Yuhan Zhang,principal economist of the China Center at the Conference Board.
The lowering of the range signalled the government would implement fewer expansionary fiscal policies this year as Beijing targeted its longer-term development goal of reaching “mid-level” developed-economy income by 2035 over short-term growth.
The work report set a fiscal deficit target of 4 per cent for the coming year — the second year running in which Beijing has put it above its preferred level of 3 per cent.
It targeted consumer prices index growth of 2 per cent. This would be a challenge, analysts said, given prolonged deflationary pressures, with CPI nearly flat, producer prices declining and the deflator, the widest measure of prices in the economy, also negative.
But authorities are also increasingly concerned about weak household sentiment, announcing schemes to try to boost consumer spending.
Louis Kuijs, chief economist for Asia Pacific at S&P Global Ratings, said this was the first five-year plan to include a target of “realising a noticeable increase in consumption as a share of GDP”.
The work report sharpened its language regarding Taiwan. Li vowed to “resolutely crack down on ‘Taiwan independence’ separatist forces, oppose external interference, promote the peaceful development of cross-strait relations and advance the great cause of national reunification”.
Last year, the report contained a reference to opposing “Taiwan independence separatism” and “external interference”.
“Indeed, ‘resolutely cracking down’ is different from that, it indicates that fighting ‘Taiwan independence forces’ has been made a focus of this year’s government work,” said an analyst who has advised Taiwanese politicians on cross-strait policy.
Beijing formally criminalised speech and behaviour promoting Taiwan independence in 2024 and has since targeted some prominent Taiwanese politicians overseas.
Experts also noted that the work report did not toughen language towards the US ahead of a planned visit by President Donald Trump to Beijing.
“They are separating ‘Taiwan independence forces’ and external forces. The ‘opposition’ to Trump and other countries supporting Taiwan is not described as ‘resolute’,” said the Taiwan expert. “The attitude towards Trump is clearly more moderate.”
Among the delegates attending the NPC, Fan Shenghua, a representative of the wealthy industrialised coastal province of Zhejiang, said the growth target “will definitely be met”.
Others highlighted the outperformance of China’s economy compared with its global peers, although economists question the veracity of much of Beijing’s economic data.
“Since the pandemic started, the global economy has been in a recession, but not us, China’s economy has still been growing, the fastest in the world,” said Fan Jiuping, an NPC delegate from the north-central Shaanxi province.
The governor of the large southwestern province of Guizhou, Li Bingjun, said he would “feel pressure to reach the growth target but such pressure will in turn provide motivation for my work”.
Additional reporting by Cheng Leng, Tina Hu and Wenjie Ding in Beijing