China’s Lowest Growth Target Since 1991: A ‘Priority Shift’?

Chinese officials on Thursday set the lowest growth target in decades for the world’s second-largest economy – a move that some experts said marked an important change in Beijing’s priorities.

Officials attending the opening ceremony of China’s National People’s Congress said they were targeting growth of 4.5% to 5% as they work to revive domestic consumption and stabilize a sluggish property market.

This would be the lowest growth target since 1991, with the only exception being 2020 when no growth target was set as the economy was reeling from the Covid-19 pandemic.

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“The achievements made in the past year have been hard-won,” Chinese Premier Li Qiang said at the opening ceremony of the annual meeting. National People’s Congress (NPC) Thursday morning.

“For many years, we have rarely encountered such a severe and complex situation, where external shocks and challenges are intertwined with domestic difficulties and difficult policy choices.”

China’s growth has been slowing for years as the economy matures. But continued sluggishness in consumer confidence has exacerbated its challenges.

Epidemic-related shocks, coupled with the collapse of the real estate market – once considered a safe investment by large numbers of Chinese – have severely affected China’s spending prospects. The recession doesn’t help either.

“Employment and consumption have been on a downward trend recently,” Cynthia Zhang, who works in luxury goods, told AFP on the streets of Shanghai.

“I think everyone is feeling more uneasy, so everyone is spending in a more rational way, including my friends and family.”

Quality growth beats speed growth

China is the world’s second-largest economy, accounting for one-third of global economic growth, but despite continued strong exports, it still faces serious structural imbalances and U.S. trade pressure.

The ruling Communist Party has repeatedly said it must shift from traditional drivers such as exports and manufacturing to consumption.

Xi Jinping’s government says the focus now is on achieving “high-quality” growth through industrial upgrading, investing in new technologies and pursuing green development.

Zhang Zhiwei of Jingdian Asset Management said that this is now more important than growth rate, and the reduction of GDP target “is a big step that marks a change in policy focus”.

Li Keqiang said in an official report that other “major development goals” for 2026 include a consumer price index increase of about 2% and “resident income growth in step with economic growth.”

The government also outlined stimulus measures for this year and set the budget deficit at around 4% of GDP, similar to last year.

The public budget reached 30.01 trillion yuan, an increase of 4.4% over the previous year.

The report stated that 1.3 trillion yuan (US$188.5 billion) of ultra-long-term special government bonds and 4.4 trillion yuan of local government special bonds will be issued for “major national strategies.”

Doubts remain

However, not everyone is convinced there will be a “policy shift” in Beijing, with some analysts worried this year’s plan will not change the economy’s current trajectory.

“It is time for the central government to increase the budget deficit to boost the economy,” Zhu Tian, an economics professor at China Europe International Business School, told AFP.

Su Yue of the Economist Intelligence Unit noted that consumption subsidies will fall slightly, “reflecting the government’s desire to use such tools more selectively… to curb destructive price competition.”

However, the current model still favors the supply side, which risks diverting more resources to production and “potentially exacerbates existing economic imbalances,” she said.

For example, China is investing heavily in high-tech industries such as semiconductors and artificial intelligence to increase self-reliance during turbulent geopolitical times.

The draft of the 15th Five-Year Plan released on Thursday outlines goals such as doubling GDP per capita by 2035 compared with 2020. The plan also focuses on boosting consumption but calls for technological development in areas such as artificial intelligence, high-end manufacturing, and energy and resource security.