MNI: China's Decades-Low GDP Target Fits Econ Slowdown Trend

Beijing’s move to set a 2026 GDP target range of 4.5–5%, the lowest in three decades and down from “around 5%” last year, broadly matches estimates of the country’s potential growth rate, policy advisors told MNI, noting the planned fiscal expansion should still allow growth to approach the 5% mark.

“Setting a target range could provide more flexibility, and avoid overdrawing policy space in advance,” said Gong Liutang, director of the Institute for Advanced Study at Wuhan University, citing the results of Thursday’s Two Sessions meeting and the publication of Beijing’s Government Work Report. 

Gong has revised down his estimate of potential growth to 4.5–5.5%, as demographic dividends fade and returns on traditional investment decline. (See MNI: Lower China GDP Growth Eyed Amid Economic Headwinds)

Xu Hongcai, deputy director of the China Association of Policy Science’s Economic Policy Commission, said growth close to 5% remains achievable and would provide a solid start to the country’s 15th Five-Year Plan. Fiscal support similar to last year’s level, alongside ongoing reforms aimed at expanding domestic demand, should be sufficient to support the economy, he said, adding that large-scale stimulus is unnecessary given underlying economic resilience.

The new target reflects a realistic policy approach amid rising global uncertainty, said Lin Yifu, a member of the Standing Committee of the Chinese People’s Political Consultative Conference (CPPCC). He expects technological innovation and emerging industries to become the primary drivers of future growth.

According to the Government Work Report, China will set its deficit-to-GDP ratio at around 4%, implying a government deficit of CNY5.89 trillion, CNY230 billion higher than last year. However, quotas for ultra-long-term special treasury bonds and local government special bonds were maintained at CNY1.3 trillion and CNY4.4 trillion respectively, falling short of some market expectations for a moderate increase.

Zhao Xijun, co-dean of the China Capital Market Research Institute at Renmin University, said the current level of policy support is adequate given the lower growth target. Nevertheless, he argued authorities should still aim to achieve growth close to 5% this year to reduce pressure later during the Five-Year Plan period. China needs to maintain average annual growth of at least 4.7% over the next decade to meet its 2035 goal of doubling per capita GDP from 2020 levels.

GROWTH DRIVERS

Lian Ping, director of the China Chief Economist Forum, pointed to an expansion in policy-based financial instruments, which will rise from CNY500 billion to CNY800 billion this year and are expected to provide a significant boost to infrastructure investment.

Local governments, previously constrained by rising debt-servicing pressures and declining land sales revenue, are likely to see improved fiscal capacity after central authorities intensified efforts since 2024 to resolve local government debt risks, he said.

Gong said fixed-asset investment, which fell 3.8% year-on-year in 2025, should rebound following the launch of 109 major national projects. At the same time, the gradual stabilisation of the real-estate market should reduce its drag on household consumption.

Authorities will also maintain efforts to support consumption, including issuing CNY250 billion in ultra-long-term special treasury bonds to finance the consumer goods trade-in programme, slightly below last year’s CNY300 billion, Gong said.

In addition, policymakers are placing greater emphasis on medium- to long-term structural measures, including a forthcoming plan to boost household income and a stronger focus on expanding service-sector consumption, he added. (See MNI: China Needs SOE Share Transfer To Boost Pensions-Advisors)