China lowers GDP growth target slightly; no major changes in policy stance planned

The fourth session of China’s 14^th National People’s Congress (NPC) convened on Thursday (Mar. 5) in Beijing. The NPC is China’s highest legislating body, but in practice serves largely as a formal rubber stamp for decisions made earlier. The important approvals at this year’s NPC session, which lasts roughly a week, include green-lighting of the government’s programme for this year, longer-term planning frameworks, the budget, major legislative changes and adoption of new laws. The next five-year plan, which saw its draft version released last autumn (BOFIT Weekly 46/2025), will also be approved.

The first day’s session began with the government’s review of the past year and a laying-out of plans for on-going and coming years. As expected, premier Li Qiang announced China would pursue a growth target of 4.5–5 % of GDP this year, a slight reduction from last year’s “about 5 %” target. Premier Li noted that China continues to pursue its long-term goal of doubling the country’s 2020 GDP per capita by 2035. Reaching this long term goal, however, requires that the country sustain average annual GDP growth of around 4 % over the next ten years. Among the other targets, the 2026 inflation target will remain at 2 % and serve as an inflation ceiling rather than actual target. Gains in household income are again expected to match the pace of GDP growth. Moreover, China seeks this year to reduce its carbon-intensity (CO₂ emissions to GDP) by 3.8 % from 2025.

No significant adjustments of the economic policy stance are planned. The budget deficit will remain at its current level of 4 % of GDP, and there doesn’t seem to be big changes planned for other public finance elements either. There are also no major changes expected for the monetary stance, which remains accommodative to support growth. Exchange rate stability continues to be an important goal.

The policy priorities for the current year are consistent with the 5-year plan framework. The priority list, however, has been reordered slightly, with measures to strengthen domestic demand now seem to be given highest priority. The measures mentioned in the government programme appear to be rather modest, however. The government says it has plans to draft a programme for increasing household incomes, but no details on the programme have yet been released. China will keep in place its already 18-month programme for encouraging households to replace their old appliances with new ones, as well as the interest subsidy programme launched last summer. Smaller, more targeted, measures have also been promised. In fixed investments, more government financing will be directed toward national policy priorities and supporting the private sector investment growth, which has faded in recent years. Other familiar themes include industrial development, innovation and technological self-sufficiency, all areas of emphasis for public capital flows. The government also seeks to accelerate the broad‑based adoption and application of artificial intelligence across the economy and society. On the reform side, the government will continue to strive for reduced trade barriers within in the country and local protectionism. The government remains committed to the green transition.

The government programme appears to offer little in the way of significant new policy directions. With the announced plans and measures, the domestic demand growth might remain sluggish and the economy will need to continue to rely heavily on the export sector for growth this year. The government programme also pays little attention to the real estate sector, and apparently offers no significant new national measures for stabilising the sector.