China has set a growth target of between 4.5% and 5% for 2026, the lowest since 1991, as expected by analysts, although experts point to disappointment with economic stimuli and measures to reinforce consumption.
“Policies will generally remain unchanged this year. We will see some additional monetary easing, but little in the way of fiscal support. And despite [as autoridades] claim to want to rebalance the economy towards consumption, concrete measures in this regard remain timid”, assures Julian Evans-Pritchard, from the British consultancy Capital Economics, in a report.
The analyst detects “little urgency” within the Chinese Government to revive domestic demand, which is why he predicts that the second largest economy in the world “will continue to face difficulties due to excess capacity [industrial] and the weakness of inflation for some time”.
When inaugurating the annual session of the National People’s Congress (NPC, legislative), the main political event of the year in China, Prime Minister Li Qiang also renewed a target of 4% for the deficit, a ceiling of 2% for inflation and a limit of 5.5% for unemployment in urban areas, all unchanged compared to 2025.
The objectives released today outline “an economy that is entering a slower expansion phase.(…) Sustainability is taking over speed as the main priority for growth”, says Sarah Tan, from the rating agency Moody’s Analytics, who adds that a less ambitious target also takes pressure off Beijing to adopt aggressive stimulus policies and grants it “greater flexibility”.
According to official data, the second largest economy in the world met its objective by growing 5% in 2025, although experts continue to point out problems such as weak domestic demand, the risks of deflation, geopolitical tensions, a real estate crisis that has not yet reached its bottom or the lack of trust between consumers and the private sector.
“The authorities expect inflation to recover somewhat this year, but they are not counting on a significant deflationary impulse. They are unlikely to do everything they can to return it to 2%, after 0% recorded last year”, explains Evans-Pritchard.
For him, the success threshold that Beijing has established – returning prices to “positive levels” – is “quite low”, even taking into account that the recent crisis in the Middle East could translate into increased inflation due to rising energy costs.
The government action report presented today by Li “does not point to many stimulus measures capable of boosting domestic demand”, he highlights.
Tan points to initiatives aimed at encouraging family consumption within the scope of the 2026-2030 five-year plan, which will be approved by the APN, namely the increase in pensions and care for the elderly, as well as employment support for graduates and workers who migrate from less developed provinces.
The official also announced reductions in interest rates and bank reserve requirements (RRR, the percentage of funds a bank cannot lend) under monetary policy this year, although Capital Economics considers the People’s Bank of China (PBOC) to be moving “slowly,” with rates just 10 basis points below their level a year ago.
Evans-Pritchard anticipates additional cuts of 20 basis points throughout 2026.
The economist also highlights divergences between budgetary support for consumption and investment: in the first case he speaks of “disappointment” due to the “lack of a more significant impulse”, reiterating that Beijing is betting on strengthening supply instead of demand; In the second, he considers that favorable policies will be “substantial”.
“It appears that the majority of the 4.4 trillion yuan (about 548 billion euros) planned for special bond issuances – intended for local and regional administrations – this year will continue to be used in investment projects,” adds Evans-Pritchard.
“This will probably not prevent the weight of investment in GDP from continuing to decline this year, given the dwindling appetite of private companies. But it suggests that the authorities are still resisting the structural forces that weigh on investment”, he concludes.
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