Each March, the PRC government gathers in Beijing for the meetings of the National People’s Congress (NPC) and the National Committee of the Chinese People’s Political Consultative Conference (CPPCC). Known as the “Two Congresses,” the meetings host discussions on policy guidelines for the coming year.
Under normal circumstances, Chinese Premier Li Qiang’s Government Work Report on the opening day of the National People’s Congress would draw worldwide attention. In addition to announcing the year’s economic growth target, this year also marks the start of the Chinese Communist Party’s fifteenth Five-Year Plan, making it an especially significant moment. However, on the weekend before the Two Congresses began, the United States and Israel launched strikes on Iran, shifting the world’s attention to the Middle East.
“Rarely in many years have we encountered such a grave and complex landscape, where external shocks and challenges are intertwined with numerous domestic difficulties and difficult choices,” said Li Qiang at the start of his report.
However, despite the turbulent environment, this year’s government work report was notably subdued, containing few items of particular note.
Why did China set its GDP target at a 30-year low?
According to Li Qiang’s report, China has set its economic growth target for this year at 4.5 to 5 percent—the lowest growth target in nearly three decades, excluding the Covid years.
In reality, China has already moved beyond its era of rapid expansion. Last year’s target of “around five percent” had already drawn skepticism from observers who considered it too ambitious.
Moreover, cities and provinces around China had begun releasing their targets ahead of the Two Congresses. Guangdong province, an economic powerhouse, revised its growth target to 4.5 to 5.0 percent, making the national adjustment unsurprising.
Still, the release of the overall numbers was akin to the government officially recognizing for the first time that China’s economy is starting to show signs of sluggishness.
“The proposed targets mainly reflect the consideration, in this opening year, of the need to create room for structural adjustment, risk prevention, and reform in order to lay a solid foundation for better development in the future,” explained Li Qiang in the report.
Despite lowered GDP growth targets, this year’s fiscal deficit ratio and the scale of central government bond issuance are comparable with last year’s.
China’s Economic Growth Target Dips Below 5 Percent for the First Time in 2026
Overview of China’s overall economic targets in recent years
| 2026 | 2025 | |
| Economic Growth | 4.5–5% | Around 5% |
| Urban Surveyed Unemployment Rate | Around 5.5% | Around 5.5% |
| CPI | Around 2% | Around 2% |
| Debt Ratio | Around 4% | Around 4% |
| Defense Budget Growth | 7% | 7.2% |
Source: People’s Daily Online, PRC Ministry of Finance
From the outside looking in, the measures appear insufficient to stimulate China’s flagging consumer market.
“With limited stimulus to domestic demand, China will likely continue to face problems of industrial overcapacity and weak inflation in the short term,” wrote Julian Evans-Pritchard, analyst at Capital Economics.
What did the government work report omit?
Observers are also curious how Beijing will respond to recent developments in the Middle East.
“It was too late to include in the government work report, but the Middle East will be a hidden concern for China’s economy this year,” said Wang Kuo-chen, associate researcher at the Chung-Hua Institution for Economic Research.
A review of China’s Ministry of Finance budget report shows that government spending on technology, defense, public safety, and education has all increased this year, while the only category whose share has dropped is grain and oil reserves.
Share of central government spending in China over the past five years (%)
| Defense | Tech | Public Safety | Education | Reserves (grain/oil) | Diplomacy | |
| 2022 | 40.8 | 9.0 | 5.5 | 4.3 | 3.2 | 1.4 |
| 2023 | 41.0 | 8.7 | 5.5 | 4.1 | 3.5 | 1.4 |
| 2024 | 40.1 | 8.9 | 5.5 | 4.0 | 3.4 | 1.5 |
| 2025 | 41.0 | 9.1 | 5.6 | 4.0 | 3.0 | 1.5 |
| 2026 | 42.0 | 9.4 | 5.7 | 4.2 | 2.7 | 1.5 |
Source: Wang Kuo-chen, Chung-Hua Institution for Economic Research
Wang Kuo-chen observes that, following a series of U.S. actions, China can no longer obtain discounted oil from Venezuela and Iran. Meanwhile, Iran’s blockade of the Strait of Hormuz, a major global energy artery, will likely put China under pressure from rising energy prices.
With China currently facing deflation, if energy costs rise, says Wang, “the economy could move toward stagflation, which would affect corporate operations.”
Which of China’s future industries were highlighted?
Although the overall direction of the economy contained no surprises, the government work report traditionally identifies the next generation of rising industries—key indicators of Beijing’s long-term priorities.
First, in reviewing last year’s economic performance, Li Qiang stressed that China’s technological innovation had yielded “fruitful results.” Compared with previous years, when the government merely described innovation capacity as “improving,” Beijing is clearly pleased with the outcome.
In addition to citing research and development in AI, biomedicine, robotics, and quantum computing as being “at the forefront of the world,” Li Qiang also referenced China’s defense industry and the achievements of its AI sector for the first time.
Among the projects cited were the BeiDou Navigation Satellite system, the launch of the Tianwen-2 asteroid probe, and the launch of the new Fujian aircraft carrier. Li also declared that China’s “domestically developed large AI models are leading the global open-source ecosystem.”
He further identified future energy technologies, quantum technology, embodied intelligence, brain-computer interfaces, and 6G communications as industries that will determine China’s future competitiveness.
Huang Chien-chun, head of the Committee of Mainland Chinese Economic Affairs at the Chinese National Federation of Industries, observes that Beijing has already targeted 2035 for achieving “Chinese-style modernization.” The past five years under the 14th Five-Year Plan were intended to build the foundation, while the 15th Five-Year Plan beginning this year will focus on transformation, paving the way for reaching that goal during the 16th Five-Year Plan.
“If China is shifting tracks, the pace will accelerate. The strategy is to overtake competitors through the deployment of future industries. This is the key battleground in the technological competition between China and the United States,” says Huang Chien-chun.
Following the conclusion of the National People’s Congress on March 14, the full text of the 15th Five-Year Plan will be released. It should offer a clearer picture of how a slower-growing China intends to leverage “future industries” in its competition with the United States.
By Silva Shih
web only
2026-03-11