China sets a lower economic growth target of 4.5% to 5% for 2026 as
challenges loom
[March 05, 2026] By
KEN MORITSUGU and CHAN HO-HIM
BEIJING (AP) — China has signaled continuity rather than change for its
economy, setting a slightly lower target for growth this year in the
midst of a property slump and other headwinds at home and growing
uncertainty abroad.
Premier Li Qiang announced a target of 4.5% to 5% annual growth in his
report presented to the opening session of this year’s meeting of the
National People’s Congress. That compares to actual 5% growth last year
and a target of about 5% in the three years before. It's the lowest
growth target since 1991.
“While recognizing our achievements, we are also clear-eyed about the
difficulties and challenges we face,” Li said, reading much of the
35-page report in a more than hourlong address.
Experts say the lower target is in line with longer-term goals that are
less focused on high growth rates.
“GDP targets in recent years have become less important than before
because the overarching, and most important political priority has
shifted from promoting economic development to so-called ‘high-quality
development,’” said Xin Sun, a senior lecturer in Chinese and East Asian
business at King’s College London.
The government is striving to balance two goals: reviving the flagging
economy by boosting domestic spending, while also furthering leader Xi
Jinping’s ambitions to build China into 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.
China faces “a grave and complex landscape”
In its draft budget for 2026, the government also trimmed China's annual
increase in defense spending to 7%, down 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 the annual
report and budget at its closing session next week, along with a
five-year plan setting policy priorities until 2030.
China is grappling with tariff wars and actual wars. Like much 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.
The report said that free trade is under severe threat, noting rising
geopolitical risks. At home, 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 encountered such a grave and complex
landscape, where external shocks and challenges were intertwined with
numerous domestic difficulties and tough choices,” Li said in his
report.
Boosting consumption will take time
With the domestic economy in the doldrums, China has maintained growth
by exporting. Its trade surplus surged to a record of nearly $1.2
trillion last year, though exports to the U.S. fell after President
Donald Trump sharply raised tariffs. But the growth in exports to other
countries has met pushback from governments worried about their own
industries and workers.
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Military delegates assemble before the opening session of the
National People's Congress (NPC) in Beijing, Thursday, March 5,
2026. (AP Photo/Ng Han Guan)
 Li pledged to improve living
standards and boost consumer spending, which has lagged as Chinese
have tightened their belts, feeling the pinch from a property slump
weighing on home prices that has wiped out hundreds of thousands of
jobs.
Nonetheless, in line with the government’s approach in recent years,
the annual report Thursday indicated it would continue to support
domestic demand but not unleash any major new stimulus to boost
growth. “Beijing continues to prioritize strengthening industrial
self-reliance over boosting household consumption,” said Neil
Thomas, a China politics expert at the Asia Society Policy
Institute.
The report said the government would issue 250 billion yuan ($36
billion) in bonds for rebates to consumers who trade-in cars,
appliances and other products for new ones. City-specific policies
to control new housing supply and reduce unsold properties will be
used to stabilize the property market, Li said.
He Meiru, a real estate agent in southern China, said he’s lucky if
he completes one deal every two months. His monthly income is
hovering around 10,000 yuan ($1,400) — less than a third of five
years ago. “It’s been a tough period for many — jobs are hard to
find, people don’t have money,” he said.
Apart from a property market recovery, social welfare spending and
improved job security are needed to get families to spend more of
their savings, said Ecaterina Bigos of AXA Investment Managers.
“Reviving domestic demand is key for sustained long-term growth,"
she said. “However, redirecting China toward higher levels of
domestic consumption will take time.”
China has purged its military leadership
The increase in defense spending to 1.9 trillion yuan ($270 billion)
comes against the backdrop of a widespread purge of military
officials over corruption charges.
Analysts believe the dismissals are meant both to reform and
modernize the military and to ensure Communist Party control over
the People's Liberation Army. Nine military officers were among 19
delegates dismissed from the National People's Congress ahead of
this year's meeting.
This year's report to the Congress repeated the government's
commitment to "the Party’s absolute leadership over the people’s
armed forces." Then it added a new line: “Guided by the principle of
ensuring political loyalty in the military, we will continue to
improve military political conduct.”
___
Chan reported from Hong Kong. Associated Press writer Huizhong Wu
and researcher Shihuan Chen contributed.
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