China sets 2026 growth target at 4.5%–5%, below 2025 pace

2026-03-05 - 04:13

File image of the fully automated cargo terminal of the port in Qingdao, in China’s eastern Shandong province. A lower growth target gives Beijing more room to reduce reliance on exports. (AFP pic) SINGAPORE: China has set its 2026 economic growth target at 4.5%-5%, slightly lower than the 5% pace achieved last year, signalling room for greater, albeit not decisive, measures to address industrial overcapacity and rebalance the economy. Analysts have said a lower growth target gives Beijing more flexibility to implement reforms that make the world’s second-largest economy less reliant on exports for growth, having posted a record US$1.2 trillion trade surplus in 2025. China also released its 15th five-year plan, and as widely expected, pledged investments in innovation, high-tech industries, scientific research and a “notable” – but unspecified – increase in household consumption as a share of economic output. Yuan Yuwei, fund manager at Trinity Synergy Investments Hong Kong noted that the policies were generally mild, without aggressive moves. “It indicates that they are comfortable with slowing headline growth. The focus is to stabilise the economy, not to significantly lift growth. These are very pragmatic targets that we are seeing from China. “The focus for the government is very clear. High-tech growth, private consumption need to be raised into the medium term. But consumption has been lagging and weighed down by the property sector, so it won’t be so easy to lift this in the short term. Whereas exports and the manufacturing sector – I think those will be the key growth engines this year.” Shier Lee Lim, lead FX and macro strategist for APAC, Convera Singapore said this marked the lowest target in decades and signals a recognition that headwinds from slower external demand, geopolitical uncertainty, and persistent domestic deflationary pressures will likely weigh on growth momentum. “China’s continued commitment to higher fiscal deficit and targeted support for technology sectors shows a willingness to balance structural reforms with near-term support measures. “The authorities’ focus on boosting domestic demand and consumer sentiment is crucial, especially as weak household confidence remains a drag on recovery.” Saktiandi Supaat, regional head of FX research and strategy, global markets Maybank Singapore said the lowered growth target shows the government prioritizes quality over speed. Giving a range instead of a target figure means China is willing to tolerate slower growth, and will accelerate economic transformation, which is not a bad thing in the long run. “The target has nothing to do with the Iran crisis. “China’s market sentiment today is lifted mainly by improving risk appetite in global markets overnight.” he said.