China Sets Moderate Growth Target as Economic Headwinds Loom

BEIJING — China has signaled a continuation of its current economic policies, setting a growth target of 4.5% to 5% for 2026 amid ongoing challenges in the property sector and increasing global economic uncertainty. The target, announced by Premier Li Qiang at the opening session of the National People’s Congress (NPC), represents a slight decrease from the 5% growth achieved in 2025 and the approximately 5% target set in the preceding three years. It is the lowest growth target set by China since 1991.

Balancing Growth and Self-Reliance

Li emphasized the need to balance economic revival with the pursuit of technological self-reliance, particularly in areas like artificial intelligence, robotics, and advanced semiconductors. The government’s approach prioritizes strengthening domestic industries over large-scale stimulus measures to boost consumption, according to Neil Thomas, a China politics expert at the Asia Society Policy Institute.¹

Geopolitical and Domestic Challenges

China faces a “grave and complex landscape” characterized by geopolitical risks, including ongoing conflicts and trade tensions. ¹ Domestically, the country is grappling with an imbalance between strong manufacturing output and weak consumer demand. The report highlighted the difficulties of transitioning to new economic drivers.

Defense Spending and Military Reform

The government proposed a 7% increase in defense spending, reaching 1.9 trillion yuan ($270 billion). ¹ This increase coincides with a widespread purge of military officials amid allegations of corruption, which analysts believe is aimed at modernizing the People’s Liberation Army and reinforcing Communist Party control. Nine military officers were among 19 delegates dismissed from the National People’s Congress ahead of this year’s meeting.

Property Market and Consumer Spending

Efforts to stimulate consumer spending include the issuance of 250 billion yuan ($36 billion) in bonds for trade-in rebates for cars, appliances, and other products. ¹ City-specific policies will be implemented to stabilize the property market and reduce unsold properties. Yet, real estate agents like He Meiru in southern China report significant declines in income and sales, highlighting the challenges facing the sector. ¹

The Road Ahead

Analysts suggest that boosting domestic demand and improving social welfare spending are crucial for sustained long-term growth. ¹ Reviving domestic consumption will require time and a concerted effort to address concerns about job security and economic stability.

The nearly 3,000-member Congress is expected to approve the annual report and budget, along with a five-year plan outlining policy priorities until 2030, at its closing session next week. ²