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
China set its lowest growth target in decades, acknowledging domestic challenges and highlighting global uncertainty, while maintaining some stimulus measures to counter a possible escalation of external shocks.
Beijing announced its GDP growth target for 2026 on Thursday 4.5% to 5%the least ambitious goal since the early 1990s.
The lower target range leaves room for policymakers to “respond to the external environment, which has seen increased uncertainty this year,” Danyang Shen, head of the team that wrote the target-setting report, told reporters Thursday, according to a translation from Chinese by CNBC.
“Uncertain and difficult-to-predict factors may turn out to be more than expected,” he said, emphasizing that “everyone has seen the latest global trend.”
Just three months into 2026, Beijing faces heightened economic risks as the U.S.-Israel conflict with Iran, a key oil supplier to China, puts Beijing’s energy supplies at risk – and it comes against the backdrop of the ouster of Nicolas Maduro in Venezuela, another major oil supplier to China.
China has would have ordered the largest state oil refiners to suspend exports of diesel and gasoline, fearing that the ongoing Iranian conflict could disrupt easy access to energy. American military action in the Middle East has also raised concerns on whether a meeting between US President Donald Trump and his Chinese counterpart Xi Jinping later this month would take place as planned.
The lowered GDP target also reflects the severity of persistent obstacles to domestic growth.
Chinese Premier Li Qiang made a rare acknowledgment of the impact of U.S. tariffs during his presentation on the country’s economic goals on Thursday. It also painted a bleak picture of businesses’ struggles, as well as local governments’ ongoing financial woes that have sometimes even led to delays in paying employees’ salaries.
The report is “surprisingly frank” and asserts that weak consumption and investment have weighed heavily on growth momentum,” said Han Shen Lin, The Asia Group’s country director for China.
But it’s “ultimately a matter of confidence in the future,” Lin said. “Nothing in the plan really addresses this concern, so the market will take ‘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 largely in line with last year, when the economic growth target was around 5%.
“I think people already have the impression that the economy is not growing [at] “5%,” said Liqian Ren, head of Mordern Alpha at US fund manager WisdomTree. Lowering the GDP target “probably brings it closer to what people on the ground are feeling.”
“Ordinary people are the ones who care the most about the unemployment situation,” she said. The youth unemployment rate in China remained highstanding at 16.3% in January, while the national unemployment rate averaged 5.2% last year. For comparison, the youth unemployment rate was 9% in the United States in January.
The Chinese government pledged Thursday to create 12 million urban jobs with an urban unemployment rate of “around 5.5%.” He did not share specific plans to do so.
Technology, not real estateDespite a persistent downward spiral in the real estate market, Beijing’s plans to stem the sector’s decline were similar to those detailed last year – and Thursday’s business report even called the efforts “effective.”
Meanwhile, policymakers continued to increase efforts to achieve technological 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, the push toward high-tech industries has not compensate for the obstacles to growth. New industries such as AI, robotics and electric cars added just 0.8 percentage points to its GDP between 2023 and 2025, according to research firm Rhodium Group. Meanwhile, traditional sectors, including real estate, saw a combined decline of 6 percentage points over the same period.
A minimum level for growthExport growth remains the “main driving force”, said Larry Hu, head of China economics at Macquarie. “If exports remain strong, policymakers may continue to tolerate weak domestic consumption. Conversely, if exports weaken, they will step up domestic stimulus measures to defend the GDP target.”
China plans to issue 1.3 trillion yuan ($188.5 billion) of ultra-long-term special treasury bonds in 2026, the same as last year, and allocate 250 billion yuan to support the consumer goods exchange program – a reduction from 300 billion yuan last year.
“This marks Beijing’s explicit shift from stimulus policy in response to the crisis to preserving policy space for 2027-2030,” said Jeremy Stevens, Asia economist at Standard Bank, based in Beijing.
That said, this modest growth target will allow the world’s second-largest economy to reach its goal of doubling its size by 2035 from 2020 levels, in line with Beijing’s long-term goals. Shen estimates that China’s economy only needs an average annual growth of 4.17% over the next decade to reach the 2035 target.
China’s leaders “would rather beat a modest number than miss a bold number,” said Lin, of The Asia Group.
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