China sets a lower economic growth target of 4.5% to 5% for 2026 as challenges loom

China Sets Lower Economic Growth Target Amid Domestic and Global Challenges

China has signaled a more conservative approach to economic planning, setting a growth target of 4.5% to 5% for 2024, slightly below last year’s actual growth of 5%. The announcement came during Premier Li Qiang’s address at the opening session of the National People’s Congress, where he delivered a sobering assessment of the challenges facing the world’s second-largest economy.

“While recognizing our achievements, we are also clear-eyed about the difficulties and challenges we face,” Li said during his more than hour-long speech to the nearly 3,000-member legislative body, which typically endorses policies already determined by Communist Party leadership.

The lowered growth expectations—the lowest since 1991—reflect China’s struggle with a persistent property market slump, weak consumer spending, and growing external pressures including trade tensions with Western nations. Experts suggest this conservative target aligns with the government’s evolving priorities.

“GDP targets in recent years have become less important than before because the overarching, and most important political priority has shifted from promoting economic development to so-called ‘high-quality development,'” explained Xin Sun, a senior lecturer in Chinese and East Asian business at King’s College London.

Chinese policymakers face the difficult task of reinvigorating domestic consumption while simultaneously advancing President Xi Jinping’s strategic goals of technological self-sufficiency in critical sectors like artificial intelligence, robotics, and semiconductor production. This balancing act takes place against what Li described as “a grave and complex landscape” of global uncertainty.

The property crisis continues to weigh heavily on economic prospects. Real estate, traditionally a driver of Chinese growth, has been mired in a prolonged downturn that has eroded household wealth and suppressed consumer spending. He Meiru, a real estate agent in southern China, describes firsthand the market’s struggles: “It’s been a tough period for many—jobs are hard to find, people don’t have money.” His monthly income has fallen to around 10,000 yuan ($1,400), less than a third of what he earned five years ago.

In response, the government plans to issue 250 billion yuan ($36 billion) in bonds to fund consumer rebates for trading in cars, appliances, and other products. Li also announced city-specific policies to manage housing supply and reduce property inventory.

However, experts caution that more substantial measures may be necessary to revitalize consumer spending. “Reviving domestic demand is key for sustained long-term growth,” said Ecaterina Bigos of AXA Investment Managers. “However, redirecting China toward higher levels of domestic consumption will take time.” She emphasized that meaningful recovery would require improved social welfare spending and job security to encourage families to spend rather than save.

China’s record $1.2 trillion trade surplus last year underscores its continued reliance on exports to maintain economic momentum. But this strategy faces growing headwinds as major trading partners, including the United States and European nations, raise concerns about market imbalances and implement protective measures.

The government also trimmed its annual increase in defense spending to 7%, down from 7.2% in recent years, bringing the total military budget to 1.9 trillion yuan ($270 billion). This adjustment comes amid a significant purge of military officials on corruption charges, widely seen as an effort to modernize the armed forces while reinforcing Communist Party control.

Li’s report notably emphasized “the Party’s absolute leadership over the people’s armed forces” and introduced new language about “ensuring political loyalty in the military” and improving “military political conduct,” reflecting the ongoing campaign to tighten oversight of the People’s Liberation Army.

As the National People’s Congress continues its deliberations before concluding next week, international observers will be watching closely for additional policy signals that might indicate how China plans to navigate its complex economic challenges while pursuing its long-term strategic objectives.