China sets lower growth target as domestic consumption lags

China sets lower growth target as domestic consumption lags

Key economic shifts and defense spending highlighted at NPC session

At the annual National People’s Congress, China announced a reduced economic growth target for 2026, marking the lowest such projection in decades. This adjustment aligns with efforts to stimulate domestic consumption and stabilize the property sector. The new range of 4.5% to 5% contrasts with last year’s goal of approximately 5%, signaling a strategic pivot in policy focus.

During the Two Sessions gathering, Premier Li Qiang opened the NPC on Thursday, a body composed of nearly 3,000 members that primarily endorses policies established by CCP leaders. While the congress will finalize the annual report and 2026 budget next week, it also aims to approve a five-year plan outlining priorities through 2030.

“While recognizing our achievements, we are also clear-eyed about the difficulties and challenges we face,” the government report emphasized, reflecting a broader acknowledgment of economic stagnation. China’s growth has slowed over recent years as its economy matures, prompting a shift from export-driven models toward consumption-based expansion.

Despite the lower growth target, Beijing opted to raise its military budget by 7%, allocating 1.90 trillion yuan ($276 billion) for defense. This amount represents roughly one-third of the U.S. military budget, with funds supporting salary increases, training exercises near Taiwan, cyberwarfare capabilities, and advanced equipment acquisitions.

“All these steps will enhance our strategic capacity to safeguard China’s sovereignty, security, and development interests,” said Li Qiang, underscoring the importance of defense modernization amid economic adjustments.

Analysts note that the decision to lower the growth target signifies a departure from past priorities, as officials emphasize quality over speed. “The policymakers have repeatedly stressed that the quality of growth matters more than its rate,” wrote Zhiwei Zhang, chief economist at Pinpoint Asset Management, in an AFP-reported analysis.

China’s defense spending, which has grown by 6-7% annually since 2016, remains slightly below last year’s level. This year’s increase underscores the government’s commitment to strengthening national security while navigating economic challenges. The report also highlighted ongoing investments in military preparedness, including drills and technological upgrades.