Beijing: Before an audience of applauding delegates at the Great Hall of the People, Chinese President Xi Jinping signaled a shift in economic priorities as China announced its lowest economic growth target in three decades. Premier Li Qiang stated a goal of 4.5 to 5 per cent growth for 2026, a significant reduction from previous targets.
Alongside the lowered growth target, China announced a 7 per cent increase in defense spending, the slowest rate in five years, prompting speculation about the direction of the People’s Liberation Army following a recent wave of dismissals of senior military officials. The announcement coincided with the opening of the annual National People’s Congress, China’s legislative body.
The five-year plan unveiled Thursday underscored Xi Jinping’s long-term strategy to position China as a competitor to the United States in advanced technologies, particularly semiconductors and artificial intelligence. This ambition, experts say, has been intensified by trade and technology restrictions imposed by the US during the Trump administration and continuing under the current administration. Neil Thomas, a China expert at the Asia Society Policy Institute, stated that the plan is “absolutely about the US,” and that Xi’s focus on self-reliance has been “turbocharged” by US trade policies.
The plan also addresses domestic issues, including healthcare and education, and reiterates the goal of shifting China’s economy towards greater reliance on domestic consumption. However, critics question the extent to which these goals have been translated into concrete policy changes.
The National People’s Congress, increasingly controlled under Xi Jinping’s leadership, convened with its customary level of stage-managed formality. The congress is expected to approve the government’s plans and targets with little debate. The proceedings take place as Beijing prepares to host US President Donald Trump in the coming weeks, against a backdrop of ongoing trade disputes and heightened global uncertainty.
Li Qiang, in his address to the congress, acknowledged the economic challenges facing China, stating that “the imbalance between strong supply and weak demand is acute,” and that businesses were facing difficulties and employment was becoming more challenging to secure. He also praised China’s resilience in the face of US tariffs, and criticized what he described as threats to multilateralism and free trade.
The lowered growth target reflects a slowdown in the Chinese economy, driven by weak domestic demand and a prolonged slump in the property market. Despite a record $1.2 trillion global export surplus last year, China continues to grapple with overcapacity in key industries, such as electric vehicles and solar panels, leading to deflationary pressures. Richard McGregor, from the Lowy Institute, noted that even with increased consumption, a 4.5 per cent growth rate suggests continued reliance on exports.
A recent analysis by the Rhodium Group highlighted the presence of “zombie companies” – financially unsustainable businesses kept afloat by government funding – which are hindering the dynamism of the Chinese economy. The firm estimated China’s actual growth rate last year to be around 3 per cent, casting doubt on official figures. The continued reliance on exports has also fueled trade tensions with the US, Europe, and other Asian countries, as they accuse China of dumping cheap products into their markets.
