(March 5): China set its most modest growth target in more than three decades, in a tacit acknowledgement that the model powering the country’s rapid rise for four decades is showing strains.
The goal — a range of 4.5% to 5% — is the first formal downgrade since 2023 and the least ambitious expansion goal since 1991. While widely anticipated by economists, it carries symbolic weight in a country where growth figures function as political statements as much as economic forecasts.
The shift signals Beijing’s comfort with a slower pace while seeking more sustainable growth drivers to replace debt-fuelled property and infrastructure investment. A lower target also reduces the pressure on officials to deploy aggressive stimulus despite a volatile global trade environment.
The targets suggest that China “will not be recklessly spending to chase a specific growth level”, said Lynn Song, chief economist for Greater China at ING Bank NV. “The move will allow for Chinese policymakers to have more flexibility with regards to the 2026 goals.”
Yields on China’s 10-year government bonds initially drifted lower in morning trade as investors reacted to a fiscal plan that kept debt quotas and budget deficit targets steady, before paring the move to be little changed.
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The offshore yuan rose 0.1% against the dollar, extending a rally from the previous session, after the PBOC set the currency’s fixing to strongest since 2023.
Premier Li Qiang officially announced the goal in a speech in Beijing on Thursday. He acknowledged the “formidable” task of transforming the economy and the “acute” imbalance while expressing confidence in the country’s long-term growth potential.
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“In proposing these targets, we have considered the need to leave some room for structural adjustments, risk prevention, and reform in the opening year of this five-year plan period, so as to lay a solid foundation for delivering better performance in the coming years,” he said.
The report to the national parliament also keeps fiscal support this year roughly at the same level while lowering the amount of subsidies for buying consumer goods.
Government funding for the trade-in programme edged down to 250 billion yuan (US$36 billion or $46.22 billion) from 300 billion yuan, though the initiative’s impact has already been fading in recent months as a higher base of comparison from earlier kicked in.
Hanging over any projection is a summit between Chinese leader Xi Jinping and President Donald Trump, the outcome of which could affect how much Chinese factories can sell to the world’s largest consumer market. Widening Middle East conflicts risk disrupting trade routes and complicate the meeting expected in weeks.
Surging exports accounted for a third of China’s 5% growth last year, the highest share since 1997. This reliance highlights a deepening imbalance as efforts to boost domestic spending have so far failed to offset the impact of a property market collapse.
“The lower GDP target reflects the government’s ongoing efforts to rebalance the economy and address structural imbalances,” said Carlos Casanova, senior Asia economist at Union Bancaire Privee in Hong Kong. “However, the shift toward consumption is unlikely to materialise unless the real estate sector is stabilised first.”
A conservative growth target would reduce the prospects of forceful stimulus. The government is reluctant to roll out sweeping easing as it did in previous downturns, for fear of worsening a record debt-to-GDP ratio and squeezing profit margins at state banks.
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Still, that remains above the 4.17% average annual gain the government deems necessary for the next decade to double per capita GDP between 2020 and 2035. Xi sees achieving the milestone as a critical step to turn China into a “powerful modern socialist country” by mid-century.
As China’s trading partners increasingly push back on its record trade surplus, the International Monetary Fund is among those urging China to embrace a model based on domestic consumer spending.
However, the government has struggled to shift resources to households while prioritising industrial self-reliance for the sake of national security. A patchy social safety net and increasing working hours are also preventing individuals from spending more.
Investors are awaiting details of a draft of the government’s economic programme for the next five years. Setting a specific goal for consumption’s share of the economy would signal Beijing’s commitment to rebalancing away from its export-dependent model.
There’s no mention of such a goal in Li’s work report. Instead, Li expressed only cautious support for key sectors that economists see as crucial to boosting sentiment.
Despite the property market’s deepening downturn, the government’s language describing measures to support the industry remained largely in line as last year. And instead of explicitly targeting a bottoming out of the market, the work report only pledged to “stabilise” the housing market.
The government will raise the minimum payout for the basic pension, which covers mostly low-income rural residents, by 20 yuan — the same pace as the past two years. That will disappoint economists and policy advisers who have been calling for a faster increase in the pension payout to boost poor people’s spending.
China announced the headline budget deficit ratio will be maintained at a record-high level of 4% of gross domestic product. That signals a continued willingness to keep the fiscal taps open to boost demand while using government borrowing to keep the economy from cooling further.
The central government will issue 1.3 trillion yuan of ultra-long special bonds, the same as what was planned in 2025. Local governments will sell 4.4 trillion yuan of new special bonds, also matching last year.
Such special-purpose bonds are not counted toward the headline deficit, with their proceeds funding infrastructure projects, subsidies for consumer goods and business equipment as well as repaying off-balance-sheet debt.
Funding for the so-called “new financing policy tool” to supercharge infrastructure projects will expand to 800 billion yuan this year from 500 billion yuan in 2025. Under this programme, the nation’s three policy banks will raise funds and buy stakes in projects. It shows Beijing’s intention to stabilise fixed-asset investment, which contracted for the first time on record last year.
Apart from consumer goods subsidies, the government will earmark 100 billion yuan for loan subsidies and financing guarantee in order to boost domestic demand.
China kept the consumer inflation target at 2%, after trimming it last year to acknowledge deflationary pressures. The goal is viewed as a ceiling. Consumer prices were flat in 2025, marking the weakest inflation since 2009.
The government will “push for overall prices to turn positive from negative”, according to the work report. That’s the strongest official pledge yet on addressing deflation, after economy-wide prices declined for three consecutive years.
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