China sets lower growth target as domestic consumption lags

China Adjusts Economic Outlook Amid Slowing Domestic Demand

At this week’s National People’s Congress, China unveiled a revised economic growth forecast for 2026, marking the first time in decades the target has fallen below 5%. This adjustment reflects the government’s efforts to counteract sluggish consumer activity and a weakening real estate sector. The new range of 4.5% to 5% contrasts with last year’s goal of approximately 5%, signaling a deliberate shift in policy priorities.

Two Sessions Highlight Policy Priorities

The updated growth projection was announced during the annual Two Sessions, a key political event where Premier Li Qiang opened the National People’s Congress (NPC) on Thursday. The NPC, a body of nearly 3,000 members, primarily serves to endorse policies crafted by CCP leaders. At its concluding session next week, the congress will finalize the 2026 budget, an annual report, and a five-year plan outlining strategic objectives through 2030.

Despite the lower growth target, the government emphasized its commitment to “achieving even greater outcomes,” underscoring optimism about future economic performance.

“While recognizing our achievements, we are also clear-eyed about the difficulties and challenges we face,”

the report stated, highlighting the need for structural changes in China’s growth model.

Military Spending Remains Steady

China’s military budget is set to rise by 7% this year, reaching 1.90 trillion yuan (€238 billion, $276 billion). This allocation will support salary hikes, training exercises, cyberwarfare initiatives, and the acquisition of advanced military equipment. Although the budget is slightly lower than the previous year, it still represents about one-third of the U.S. military spending. Li Qiang noted that these measures aim to strengthen China’s strategic capacity to protect its sovereignty and development interests.

Analysts highlighted that the decision to scale back the growth target marks a significant move toward prioritizing sustainable, high-quality development over rapid expansion. “The focus on growth quality over speed is a major indicator of this policy shift,” Zhiwei Zhang, chief economist at Pinpoint Asset Management, wrote in a statement cited by AFP. This approach aligns with the CCP’s long-term goal of transitioning from export-driven and manufacturing-based growth to consumption-led economic progress.