Chinese President Xi Jinping, left, and Chinese Premier Li Qiang chat during the opening session of the National People’s Congress (NPC) in Beijing, Thursday, March 5, 2026.
Ng Han Guan/AP
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Ng Han Guan/AP
BEIJING – China has signaled continuity rather than change for its economy, setting a slightly lower target for growth this year amid an asset slump and growing uncertainty at home and abroad.
Premier Li Qiang announced an annual growth target of 4.5% to 5% in his report presented at the opening session of this year’s meeting of the National People’s Congress. That compares to an actual 5% growth last year and a target of around 5% over the previous three years. This is the lowest growth target since 1991.
“While recognizing our achievements, we also see clearly the difficulties and challenges we face,” Li said, reading most of the 35-page report in a more than hour-long speech.
The government is trying to balance two goals: reviving a flagging economy by boosting domestic spending and advancing Supreme Leader Xi Jinping’s ambitions to build China into a global powerhouse in AI, robotics and other advanced technologies — and not rely on the US or others for high-end semiconductors and other components.
In line with the government’s approach in recent years, the annual report on Thursday indicated that domestic demand would continue to be supported but would not unleash any major new stimulus to boost growth. “Beijing continues to prioritize strengthening industrial self-reliance over increasing domestic consumption,” said Neil Thomas, a China politics expert at the Asia Society Policy Institute.
China faces a “grave and complex landscape”.
In its draft budget for 2026, the government trimmed the annual increase in China’s defense spending to 7%, down from 7.2% in recent years. The nearly 3,000-member Congress, a largely ceremonial body that approves policies set by Communist Party leaders, will approve an annual report and budget in its closing session next week, as well as policy priorities that set out five-year plans through 2030.
China is grappling with tariff wars and actual wars. Like much of Asia, it is heavily dependent on oil and natural gas from the Middle East, and war in the region has driven up prices and threatened supplies.
The report said free trade is under severe threat given the growing geopolitical risks. At home, it highlighted the “severe” 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 are intertwined with numerous domestic difficulties and tough choices,” Li said in his report.
It takes time to increase usage
While the domestic economy has slowed, China has maintained growth by exporting. Although exports to the US fell after President Donald Trump sharply raised tariffs, its trade surplus rose to a record nearly $1.2 trillion last year. But export growth to other countries has faced pushback from governments worried about their own industries and workers.
Li pledged to improve living standards and boost consumer spending, which has lagged as the Chinese tightened their belts, pinched by a property slump that weighed on house prices that wiped out hundreds of thousands of jobs.
The government will issue 250 billion yuan ($36 billion) in bonds at a discount to customers trading in new cars, appliances and other products, the report said. Li said city-specific policies to regulate new housing supply and reduce unsold properties are used to stabilize the property market.
Meeru, a real estate agent in southern China, said he was lucky if he completed a deal every two months. Their monthly income hovers around 10,000 yuan ($1,400) — less than a third of what it was five years ago. “It’s a tough period for many – it’s hard to find jobs, people don’t have money,” he said.
Apart from the property market recovery, social welfare spending and improved job security are needed for households to spend more of their savings, said Ekaterina Bigos of AXA Investment Managers.
“Reviving domestic demand is key to sustained long-term growth,” he said. “However, it will take time to reorient China towards higher levels of domestic consumption.”
China has purged its military leadership
The increase in defense spending to 1.9 trillion yuan ($270 billion) comes in the wake of a sweeping purge of military officials over corruption allegations.
Analysts believe the layoffs are intended to reform and modernize the military and ensure Communist Party control over the People’s Liberation Army. Nine military officers were among the 19 delegates dismissed by the National People’s Congress ahead of this year’s meeting.
This year’s report to Congress reiterated the government’s commitment to “full party leadership over the armed forces of the people”. Then it added a new line: “Guided by the principle of ensuring political loyalty in the military, we will continue to improve military political behavior.”
