Beijing: Before an audience of dutifully applauding cadres at Beijing’s Great Hall of the People, Chinese President Xi Jinping put his country on track for its lowest growth target in three decades, signalling China’s tentative shift away from chasing high-speed expansion.
The growth target of 4.5 to 5 per cent for 2026 was announced by Premier Li Qiang as he delivered the annual work report to the National People’s Congress, China’s rubber-stamp parliament, on Thursday.
China also plans to boost its defence spending by 7 per cent this year, the lowest rate in five years, as speculation swirls over Xi’s plans for China’s military after his sweeping anti-corruption drives decapitated its senior ranks.
The Communist Party also unveiled its next five-year plan to the congress on Thursday, laying out Xi’s blueprint to the end of the decade. It affirmed his long-term focus on positioning China to challenge the US for supremacy in high-tech industries and AI, and reduce its reliance on American technology such as semiconductors to achieve this.
“At the strategic level, [the five-year plan] is absolutely about the US,” said Neil Thomas, a China expert at the Asia Society Policy Institute.
“Xi’s focus on industrial self-reliance and indigenous innovation has been turbocharged by Donald Trump’s trade and technology wars that he started in his first term. The global uncertainty that’s been introduced in Trump’s second term has only reinforced those trends.”
But the latest plan also deals with standard domestic policy challenges in areas such as health and education. It emphasises Chinese policymakers’ often-articulated goal of shifting the country’s economic model away from an export-dominated machine to one more focused on domestic consumption, though critics say there has been little meaningful follow-through with tangible policy changes.
The congress, under Xi’s watch, has become an even more stage-managed affair than in the past, with surprises rare as 3000 delegates gather each year to wave through pre-determined policy objectives, plans and targets.
The pageantry and performative democracy presages a big month in Beijing. Xi will host US President Donald Trump in several weeks against the backdrop of an unresolved trade feud between the world’s two biggest economies and as the US’s foreign policy decisions are adding to global uncertainty.
America’s war against Iran is threatening to bog it down in the Middle East once again, and sap its resources away from the Indo-Pacific region, where China is increasingly asserting its influence, while Beijing’s source of oil imports from Tehran has potentially been destabilised.
In his address to the parliament, Li praised China’s ability to withstand Trump’s tariff rises, saying “multilateralism and free trade are under severe threat”.
He also conceded China was facing major economic challenges, noting “the imbalance between strong supply and weak demand is acute”, some businesses were “facing difficulties in their operations, and it is more challenging for people to secure employment and earn
more”.
The shaved-down growth rate had already been foreshadowed by the party and was widely anticipated by China watchers, as the country’s economy falters under flagging domestic demand and a years-long property market slump.
“Even with a minor jump in consumption, a growth rate of 4.5 per cent is basically confirmation that China is going to continue to rely on exports for their economy,” said Richard McGregor, from the Lowy Institute think tank.
By picking winners and heavily subsidising certain industries – such as electric vehicles and solar panels – Beijing has created a knock-on problem of over-competition, which is driving down prices and fuelling a deflationary spiral.
‘Beijing is facing an essentially zombified financial system, which cannot die but continues wreaking havoc on the more dynamic sectors of the economy.’
Research firm Rhodium Group’s recent analysis on China’s economy.
So-called zombie companies that should have collapsed have otherwise been sustained by government funds rather than profits.
With domestic demand weak, companies have increasingly looked to overseas buyers. This helped underwrite China’s record $US 1.2 trillion global export surplus last year, but it has fuelled frustrations in the US, Europe and Asia that cheap Chinese products are being dumped in their markets and crippling their industries.
“Beijing is facing an essentially zombified financial system, which cannot die but continues wreaking havoc on the more dynamic sectors of the economy,” said research firm the Rhodium group in a recent analysis.
It has cast doubt on China’s growth rate, estimating that it was about 3 per cent last year.
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Lisa Visentin is the North Asia correspondent for The Sydney Morning Herald and The Age. She was previously a federal political reporter based in Canberra.Connect via X or email.
