China set its economic growth target for 2026 at 4.5% to 5%, the lowest in more than three decades, as announced by Premier Li Qiang during the opening of the National People's Congress on Thursday. The range marks a slight downgrade from the approximately 5% target over the past three years, a pace the economy achieved in 2025.

The decision reflects flexibility for structural adjustments and risk prevention in the first year of the 15th Five-Year Plan covering 2026 to 2030, where potential growth is also estimated at around 4.5% to 5%. Officials described the target as providing room to strive for better outcomes while addressing old and new challenges, including a prolonged property sector downturn, weak domestic demand, and external uncertainties. "At home, we still face quite a few problems and challenges, both old and new," the government work report stated.

Beijing faces headwinds from an acute supply-demand imbalance, deflationary pressures, and intensifying U.S. rivalry, including tariffs imposed by President Donald Trump that have impacted exports. China recorded a record $1.2 trillion trade surplus in 2025, underscoring reliance on exports amid subdued household consumption. The lower target signals tolerance for slower expansion to facilitate rebalancing, curbing industrial overcapacity, and boosting innovation and high-tech industries.

Fiscal policy remains supportive, with a budget deficit target held at 4% of GDP, matching last year, alongside special bond issuances of 1.3 trillion yuan centrally and 4.4 trillion yuan locally. Measures include raising monthly pensions by 20 yuan, increasing rural medical subsidies by 24 yuan, subsidizing childcare, and elevating research and development spending above 7% annually. Monetary policy will stay accommodative, prioritizing new economy sectors like artificial intelligence.

Analysts view the target as pragmatic, aligning with a shift toward high-quality development over sheer speed. "China must shift from its long-standing reliance on investment and exports towards a model primarily driven by innovation and consumption," said former central bank adviser Liu Shijin. Expectations point to growth landing near 4.7% to 4.8%, supported by modest domestic recovery but pressured by fading export contributions. Provincial economies like Guangdong have similarly adopted 4.5%-5% targets.

The announcement came amid the annual Two Sessions meetings, where delegates also outlined goals for the 15th Five-Year Plan, including raising core digital industries' value-added to 12.5% of GDP.