China Sets 2026 Economic Growth Target at 4.5-5 Percent, Lowest in Decades
BEIJING — China has set its economic growth target for 2026 at 4.5 percent to 5 percent, according to a government work report submitted to the National People’s Congress on March 5, marking the lowest annual target in decades as policymakers address domestic structural challenges and external pressures .
Premier Li Qiang delivered the report at the opening meeting of the fourth session of the 14th National People’s Congress at the Great Hall of the People in Beijing . The target represents a slight reduction from the “around 5 percent” goal maintained over the previous three years and, excluding 2020 when no target was set due to the pandemic, is the most modest growth goal on record going back to the early 1990s .
“The growth target for this year is well aligned with the country’s long-range objectives through the year 2035 and is broadly in line with the long-term growth potential of China’s economy, with favorable conditions in place for achieving this target,” Li said in his address .
Target Reflects Structural Considerations
According to the government work report, authorities will “strive for better in practice” while pursuing the 4.5-5 percent range . Officials emphasized that the target takes into account the need to leave room for structural adjustments, risk prevention and reform in what is the opening year of the 15th Five-Year Plan period (2026-2030) .
Shen Danyang, head of the drafting group for the Government Work Report and director of the Research Office of the State Council, told a news conference in Beijing that the goal is consistent with both domestic and global expectations .
“The economic growth target for this year is well aligned with the country’s long-term objectives through 2035. In setting this target, both domestic and international conditions have been carefully considered,” Shen said, adding that the goal leaves room for structural adjustments, risk prevention and reform .
Sun Xuegong, director-general of the department of policy study and consultation at the Chinese Academy of Macroeconomic Research, an affiliated institution of the National Development and Reform Commission, said achieving China’s goal of doubling per capita GDP from its 2020 level by 2035 would require annual growth of around 4.2 percent in the coming years, making the 2026 target “reasonable and necessary” .
Additional Economic Targets Announced
The government work report outlined several other key targets for 2026 :
- Surveyed urban unemployment rate of around 5.5 percent
- Over 12 million new urban jobs
- Consumer price index increase of around 2 percent
- Personal income growth in step with economic growth
- Basic equilibrium in the balance of payments
- Grain output of around 700 million tonnes
- Reduction of around 3.8 percent in carbon dioxide emissions per unit of GDP
The consumer price index target of around 2 percent, first set in 2025, is the lowest in more than two decades and reflects continued weak domestic demand, according to analysts cited by CNBC . For all of 2025, price growth was flat, and when excluding food and energy prices, consumer inflation came in at 0.7 percent .
Fiscal and Monetary Policy Settings
The government will continue to implement a “more proactive” fiscal policy in 2026, with the deficit-to-GDP ratio set at around 4 percent, unchanged from 2025 . Total government deficit is projected at 5.89 trillion yuan, an increase of 230 billion yuan over last year .
Expenditure in the general public budget is projected to reach 30 trillion yuan for the first time, an increase of about 1.27 trillion yuan from the 2025 level .
China will continue to apply an “appropriately accommodative” monetary policy, according to the report, and will “flexibly and effectively employ a range of policy instruments, including cuts to required reserve ratios and interest rates” .
The government plans to issue 1.3 trillion yuan in ultra-long-term special treasury bonds in 2026, unchanged from last year, with 250 billion yuan allocated to support a consumer goods trade-in program and 300 billion yuan for capital replenishment at large state-owned commercial banks . Local government special-purpose bonds of 4.4 trillion yuan will also be issued to fund major projects and alleviate local government debt stress .
Economic Challenges Acknowledged
In the government work report, Li acknowledged multiple challenges facing the economy, including a “dramatically changing international trade and economic environment” and “deep-rooted structural problems” that have weighed on consumption and investment growth .
“While recognizing our achievements, we are also clear-eyed about the difficulties and challenges we face,” Li said in his address .
China’s economic expansion has slowed in recent years as the economy matures, with policymakers repeatedly stating that the quality of growth is more important than its speed . The country is grappling with persistent deflationary pressures, a prolonged property market downturn, weak consumer confidence, and local government debt stress .
Retail sales rose 3.6 percent in 2025, while fixed-asset investment declined 3.8 percent—the first annual decrease in decades. Investment in the property sector plunged 17.2 percent . Factory-gate deflation deepened, with producer prices falling 2.6 percent from a year earlier .
Li said measures would be implemented to stabilize the real estate sector, including controlling the supply of new projects, reducing unsold housing inventory, and increasing affordable housing, while ensuring delayed projects are completed . Local government debt management will be strengthened, including controlling hidden debt and systematically restructuring obligations to reduce financial risks, he added .
External Environment and Trade Relations
The report noted that the external economic environment has become “increasingly complex and challenging” . China has navigated nearly one year of intensified trade tensions with the United States, and Li made a rare mention of economic impacts from the U.S. “tariff shock,” stating that new stimulus measures implemented last year had helped cushion the blow .
China’s trade surplus surged to a record of nearly $1.2 trillion in 2025, though exports to the United States fell after tariff increases. Export growth to other countries has encountered pushback from governments concerned about their domestic industries .
The ongoing conflict in the Middle East has also raised concerns about energy prices and supply disruptions, given China’s dependence on oil and natural gas imports from the region .
Despite these challenges, China’s economy demonstrated “strong resilience and vitality” in 2025, with its structure continuously improving, according to Shen .
Focus on Technological Self-Reliance
The government work report emphasized advancing “high-level technological self-reliance” and driving breakthroughs in core technologies in key fields . Research and development spending will rise by at least 7 percent annually during the 15th Five-Year Plan period (2026-2030), with a focus on strategic technologies, green development, and renewable energy .
China will nurture “industries of the future” including future energy, quantum technology, embodied artificial intelligence, brain-computer interfaces, and 6G technology, according to the report . The country also aims to build three international centers for sci-tech innovation and turn them into world-class innovation engines .
International Response
Marshall Mills, the International Monetary Fund’s senior resident representative in China, said that demand, supply and reform can combine to drive China’s economic growth, with significant potential for further expansion in the 15th Five-Year Plan period .
On the demand side, China’s savings pool signals strong potential for private consumption to become a core growth engine, Mills said, while on the supply side, deeper reforms to improve resource allocation can help translate innovation into productivity gains across broader sectors of the economy .
Ecaterina Bigos of AXA Investment Managers told the Associated Press that reviving domestic demand is “key for sustained long-term growth,” but added that “redirecting China toward higher levels of domestic consumption will take time” .
Defense Budget
China announced a 7 percent increase in defense spending for 2026, reaching 1.9 trillion yuan, a slight reduction from the 7.2 percent increase in recent years . The budget will finance military salary increases, training, exercises, and advanced equipment purchases, according to analysts .
“All these steps will boost our strategic capacity to safeguard China’s sovereignty, security and development interests,” Li said in the report .
Parliamentary Proceedings
The nearly 3,000-member National People’s Congress, which opened its fourth session on March 5, is expected to approve the government work report and budget at its closing session next week, along with a five-year plan setting policy priorities until 2030 . The foreign minister and heads of several economic departments are scheduled to hold press conferences during the session .
With inputs from:
China Govt: 4.5-5% GDP target
CCTV: Li Qiang delivers report
China Daily: 4.5-5% growth target
Reuters: China sets 2026 target 4.5-5%
AP: Lowest target in decades
Understanding the Global Economy: GDP, Inflation, Trade & Monetary Policy.
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