China sets a lower economic growth target of 4.5% to 5% for 2026 as challenges loom : NPR

BEIJING – China has signaled continuity rather than change in its economy by setting a slightly lower target for growth this year amid a decline in wealth and other headwinds at home and rising uncertainty abroad.

Premier Li Qiang announced a target of 4.5% to 5% annual growth in his report presented at the opening session of this year’s meeting of the National People’s Congress. This compares to an actual 5% growth last year and a target of about 5% in the three years before that. This is the lowest growth target since 1991.

“While recognizing our achievements, we are also clear-eyed about the difficulties and challenges we face,” Lee said, reading from much of the 35-page report in more than an hour-long address.

The government is trying to balance two goals: reviving the sagging economy by boosting domestic spending, while also advancing top leader Xi Jinping’s ambitions to make China a global power in AI, robotics and other advanced technologies — and one that is not dependent on the U.S. or others for high-end semiconductors and other components.

In line with the government’s approach in recent years, the annual report on Thursday indicated it would continue to support domestic demand but would not introduce any major new stimulus to boost growth. “Beijing is prioritizing strengthening industrial self-reliance rather than boosting domestic consumption,” said Neil Thomas, a China politics expert at the Asia Society Policy Institute.

China faces a “serious and complex scenario”

In its draft budget for 2026, the government cut China’s annual growth in defense spending to 7% from 7.2% in recent years. The nearly 3,000-member Congress, a largely ceremonial body that endorses policies set by Communist Party leaders, is due to approve an annual report and budget at its closing session next week, as well as a five-year plan setting policy priorities through 2030.

China is struggling with tariff wars and real wars. Like most of Asia, it depends heavily on oil and natural gas from the Middle East, and the war in that region has driven up prices and threatened supplies.

Taking into account the increasing geopolitical risks, the report says that free trade is under serious threat. Domestically, it highlighted an “acute” imbalance between strong manufacturing supply and weak demand and the challenge of shifting to new drivers of growth.

“Rarely in many years have we faced such a serious and complex scenario, where external shocks and challenges were coupled with numerous domestic difficulties and difficult choices,” Lee said in his report.

It will take time to increase consumption

Despite the domestic economy being in recession, China has maintained growth by exporting. Its trade surplus rose to a record of nearly $1.2 trillion last year, although exports to the US fell after President Donald Trump drastically increased tariffs. But growth in exports to other countries has been hit by governments concerned about their industries and workers.

Li promised to improve living standards and boost consumer spending, which has lagged as Chinese have tightened their belts, with a property slide hitting house prices that has wiped out hundreds of thousands of jobs.

The government will issue 250 billion yuan ($36 billion) of bonds at a discount to consumers who trade in new cars, appliances and other products, the report said. Li said city-specific policies to control new housing supply and reduce unsold properties will be used to stabilize the property market.

He Meiru, a real estate agent in southern China, said he is lucky if he closes a deal every two months. Their monthly income is hovering around 10,000 yuan ($1,400) — less than a third of what it was five years ago. “It’s been a tough time for many people – jobs are hard to find, people don’t have money,” he said.

In addition to the improving property market, social welfare spending and better job security are needed to get households to spend more of their savings, said Ekaterina Bigos of AXA Investment Managers.

“Reviving domestic demand is important for long-term growth,” he said. “However, it will take time to redirect China toward higher levels of domestic consumption.”

China has removed its military leadership

The 1.9 trillion yuan ($270 billion) increase in defense spending comes against the backdrop of a sweeping purge of military officials over corruption charges.

Analysts believe the dismissal is meant to reform and modernize the military and ensure Communist Party control over the People’s Liberation Army. Nine military officers were among the 19 delegates dismissed from the National People’s Congress ahead of this year’s meeting.

This year’s report to Congress reiterated the government’s commitment to “the absolute leadership of the Party over the people’s armed forces.” Then a new line was added: “Guided by the principle of ensuring political loyalty in the army, we will continue to improve military political conduct.”