BEIJING — China announced its lowest economic growth target in 35 years Thursday as the world’s second-biggest economy faces domestic challenges and global uncertainty.
This year, China aims for gross domestic product growth of 4.5% to 5% “even as striving for better in practice,” according to Premier Li Qiang, China’s No. 2 official, who delivered a “work report” at the opening session of the National People’s Congress, China’s biggest political event of the year.
That figure, the country’s lowest since 1991, compares with the 5% target achieved last year, and marks the first formal downgrade since 2023. It acknowledges a slowing of China’s economic growth as the model that drove its expansion for decades reaches its limits.
Economic Rebalancing and Investment
China is attempting to rebalance its economy by boosting domestic demand while addressing issues like a prolonged property slump, industrial overcapacity, and rising local government debt. The country is also investing heavily in artificial intelligence and robotics as it competes with the U.S. For global dominance in those industries.
Li said the government would roll out economic policies “against U.S. Tariffs,” which have varied since Trump launched a trade war with China last year. Despite falling exports to the U.S. Due to the tariffs, China’s exports to other countries have increased, resulting in a record trade surplus of almost $1.2 trillion last year.
Defense and Regional Tensions
Defense spending will increase by 7% to more than $275 billion, a slight decrease from last year’s 7.2% increase. China aims to modernize its military by 2035 amid rising tensions in the region, including over Taiwan.
Global Factors and Upcoming Meetings
The announcement comes weeks before President Donald Trump is scheduled to visit China for a meeting with Xi Jinping, where both leaders will attempt to extend a fragile trade truce. The meeting is complicated by U.S.-Israeli strikes on Iran, a close ally of Beijing.
China has been a major buyer of Iranian crude oil, purchasing 80% of its exports, though this accounts for only 13% of China’s total oil imports. Beijing is more concerned about the Strait of Hormuz, a key shipping route that Iran has effectively shut down in retaliation for the strikes, as China relies on it for one-third of its oil and a quarter of its gas imports.
Demographic Challenges
China’s economic plans are also complicated by its aging population. Officials are prioritizing policies to encourage more marriages and higher birth rates, a decade after ending the one-child policy. Li proposed building a “childbirth-friendly society” with changes to education and healthcare, addressing concerns about the high cost of raising children and limited job prospects for young people.
Frequently Asked Questions
What is China’s economic growth target for 2026?
China is aiming for gross domestic product growth of 4.5% to 5% in 2026, “while striving for better in practice.”
What factors are complicating China’s economic outlook?
China is facing challenges including a prolonged property slump, industrial overcapacity, soaring local government debt, an aging population, and geopolitical tensions, including the U.S.-Israeli strikes on Iran.
What is China’s stance on U.S. Tariffs?
Li said the government would roll out economic policies “against U.S. Tariffs,” which have varied since Trump launched a trade war with China last year.
As China navigates these complex economic and geopolitical challenges, what role will domestic policy play in achieving sustainable growth?
