Chinese President Xi Jinping, center, attends the opening session of the Chinese People’s Political Consultative Conference (CPPCC) at the Great Hall of the People in Beijing, China, Wednesday, March 4, 2026.
Qilai Shen | Bloomberg | Getty Images
China on Thursday set its 2026 GDP growth target at between 4.5% and 5% – the lowest target on record since the early 1990s – as Beijing grapples with lingering deflationary pressures and trade tensions with the United States.
The target, outlined in the government’s work report released Thursday, marks a drop from “around 5%” set over the past three years and is the most modest target on record for the world’s second-largest economy, with the exception of 2020, when Beijing did not set a growth target due to the pandemic.
Beijing also kept its budget deficit target unchanged from “around 4 percent” of last year’s GDP, as the National People’s Congress, the country’s top legislature, holds its annual meeting this week.
The 4% deficit target set for the first time in 2024 was the highest ever recorded since 2010according to data consulted via Wind Information. The previous high was 3.6% in 2020.
Chinese policymakers have kept their annual consumer inflation target at “around 2%.” First set for 2025, this is the lowest level in more than two decades and signals an implicit recognition by Beijing of weak domestic demand.
The inflation target acts more like a ceiling than a goal to achieve. For the entire year 2025, price growth remained stableand stands at 0.7% excluding the price of food products and energy, with consumer confidence remaining low.
In his work report, Chinese Premier Li Qiang acknowledged a plethora of thorny problems facing the economy, including “a radical change in the international trade and economic environment” and a “deep-rooted structural problem” that have weighed on consumption and investment growth.
“The growth target is completely realistic. It is a new shift from ‘numbers first’ to ‘quality first’ mindset,” said Tianchen Xu, senior economist at the Economist Intelligence Unit.
“Beijing does not necessarily view high growth rates as a good thing, as this could encourage local authorities to exaggerate growth with white elephant projects. — costly investment with little economic utility – and data manipulation,” Xu said.
Beijing also seeks to keep the urban unemployment rate, which stood at 5.2 percent last year, at around 5.5 percent this year and create 12 million new jobs in urban areas.
Monetary and budgetary toolkitChina 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 has allocated 250 billion yuan to support the consumer goods recovery program and another 300 billion yuan for capital replenishment of large state-owned commercial banks.
The government also plans to issue 4.4 trillion yuan of local government special purpose bonds, similar to last year, to finance major projects and ease local government debt stress, according to the work report.
“This year, government spending will continue to be quite large,” Li said in the work report, noting that boosting consumption and raising living standards should be a priority.
The relatively modest fiscal stimulus also aligns with the more conservative growth target, Xu noted.
Beijing has pledged to continue implementing “suitably accommodative” monetary policy to support growth, including possible interest rate reductions and lowering the reserve requirement ratio.
“We will develop new and better structural monetary policy instruments, increase them where necessary, and refine how they are used,” Li said.
The country’s annual parliamentary gathering, known as the “Two Sessions,” kicked off Wednesday with the opening ceremony of the Chinese People’s Political Consultative Conference, a top political advisory body.
The NPC began its meeting on Thursday and is expected to conclude its annual session on March 12. The heads of the economy and finance ministries are expected to speak to journalists on Friday afternoon.
While China’s economy grew 5% last year, the country entered a fourth year of deflation amid a housing crisis, low consumer confidence and stress over local government debt. Retail sales grew 3.6% in 2025 and factory gate deflation deepened, falling 2.6% from the previous year.
Fixed Asset Investment decreased by 3.8% last year — the first annual decline in decades. The slowdown in real estate increased with a drop in investments in the sector of 17.2%.
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Trade and geopolitics This year’s parliamentary meeting comes after the world’s second-largest economy weathered nearly a year of intense trade war with the United States, which accelerated the diversification of its exports away from the United States and toward Europe and Southeast Asia.
Premier Li made rare mention of the economic impacts of the US “tariff shock”, saying new stimulus measures implemented last year had helped cushion the blow.
The ongoing conflict in the Middle East has also raised concerns over US President Donald Trump’s planned visit to China later this month, where he is expected to meet with Chinese leader Xi Jinping to discuss a number of issues, including tariffs, export controls and Taiwan.
China has criticized US-Israeli attacks on Iran, calling for an immediate ceasefire and a return to diplomacy. Chinese Foreign Minister Wang Yi held phone calls with their Iranian and Israeli counterparts in recent days, making China an active mediator in the de-escalation of the conflict.
— CNBC’s Evelyn Cheng contributed to this story.
