China lowered this year's economic growth target to 4.5%–5%, the lowest in 35 years. Instead, it set a record-high fiscal deficit and will issue ultra-long special government bonds to boost domestic demand, while accelerating technological self-reliance in strategic industries such as artificial intelligence (AI) and actively fostering future industries. Because this year is when the 15th five-year plan (2026–2030) is finalized, attention focused on economic policy and external messaging, and it is seen as adopting a governance direction that prioritizes substance over speed of growth amid rising domestic and global uncertainties.
◇ Growth target at lowest since 1991, fiscal deficit target at record high
The annual session of the National People's Congress of China, China's equivalent of a parliament, opened at 9 a.m. on the 5th (local time). At the opening ceremony, Premier Li Qiang presented this year's gross domestic product (GDP) growth target and key policy directions through a work report.
China set this year's GDP growth target at 4.5%–5%, the lowest level since 1991. China set a 4.5% growth target in 1991 and actually achieved 9.3% growth. From 2023 to last year, in the three years after COVID-19, it presented a growth target of "around 5%" and recorded growth of 5.2%, 5%, and 5%, respectively. But with uncertainties piling up at home and abroad—from the property crisis, weak domestic demand, and youth unemployment to U.S. tariff pressure and Iranian airstrikes—it appears to have lowered its target.
This year's fiscal deficit target was set at a record-high "4% of GDP." It will also issue ultra-long special government bonds totaling 1.3 trillion yuan (about 275 trillion won), the same size as last year, while local governments are likewise set to issue 4.4 trillion yuan (about 932 trillion won) of special-purpose bonds, as they did last year. The revenue from the special-purpose bonds is expected to be used for infrastructure projects, subsidy payments, and liability repayment. Bloomberg News said, "This suggests a resolve to keep increasing government fiscal expenditure to stimulate domestic demand while using government borrowing to prevent an economic downturn."
◇ "Revive domestic demand" by expanding liquidity and improving the consumer environment
The consumer price index (CPI) inflation target was set at 2%, the same as last year. With domestic demand slumping, China has been mired in prolonged deflation. Even last year's "5% GDP growth" relied on exports rather than domestic demand.
To revitalize the domestic market, China will issue 250 billion yuan (about 53 trillion won) in ultra-long special government bonds. It will also create a 100 billion yuan (about 21 trillion won) special fund to support loan interest subsidies and financial guarantees. It will expand the scope of support for personal consumer loans and interest subsidies for service-sector workers, raise the cap on interest subsidies, and extend the implementation period.
A cut to the required reserve ratio (RRR) and a reduction in the loan prime rate (LPR), effectively the benchmark rate, were also mentioned. Li said, "We will use a variety of policy tools flexibly and efficiently to maintain ample liquidity," adding, "We will also keep the renminbi exchange rate stable at a reasonable and balanced level."
The consumer environment will also be improved. The government will scrap unreasonable regulations in the consumer sector and maximize consumption potential in culture, tourism, sports, and health and wellness. It will support local governments in encouraging spring and fall breaks for elementary, middle, and high schools, and implement a paid rotating leave system for workers. It will strengthen consumer rights protection and improve the consumption environment for foreigners.
◇ "Autonomous results in AI, biotech, robots, and semiconductors"… emphasis on science and technology self-reliance
At the opening of the National People's Congress of China, the 15th five-year plan outlining economic and social development directions for the next five years was also a key agenda item. Highlighting "new-quality productive forces" centered on strategic industries such as artificial intelligence (AI), semiconductors, and advanced manufacturing, China set technological self-reliance and accelerated innovation as core goals. The 15th five-year plan will be finalized at the closing session of the National People's Congress of China on the 12th.
Among future industries, it will encourage the development of sectors such as integrated circuits, aerospace, biotech and pharmaceuticals, and the low-altitude economy, and promote the development of future energy, quantum technology, AI, brain–computer interfaces, and sixth-generation (6G) communications. The government will take the lead in nurturing future-industry unicorns (startups valued at $1 billion or more), including by directly leading long-term investments in startups.
Li again stressed the need for self-reliance and self-strengthening in science and technology. Regarding China's scientific and technological innovation achievements last year, Li assessed, "Research and development and applications in AI, biotech and pharmaceuticals, robotics, and quantum technology reached the world's forefront. There were new breakthroughs in autonomous research and development of semiconductors, and AI large models led the world's open-source ecosystem." He added, "We must take the historic opportunity of a new round of scientific and technological revolution and industrial transformation to comprehensively strengthen autonomous innovation capabilities and provide scientific and technological support for high-quality development."
◇ Defense budget up 7%… Xi's grip on the military expands
This year's defense budget will be 1.91 trillion yuan (about 405 trillion won), up 7% from last year—the first-ever 400 trillion won–level defense budget. However, it is the lowest growth rate since 2022. China's defense spending has steadily increased since 2020, when it set the "2027 centennial of the armed forces" struggle goal. The defense budget growth rate rose from 6.6% in 2020 to 6.8% in 2021, 7.1% in 2022, and 7.2% in 2023–2024.
According to Bloomberg, China's defense budget is far smaller than that of the United States. Early this year, U.S. President Donald Trump called for increasing the U.S. defense budget by more than 50% by 2027 to $1.5 trillion (about 2,190 trillion won). It is currently awaiting congressional approval. The U.S. side estimates that China's actual defense expenditure is far higher than officially announced.
With five of the six members of the Central Military Commission, which commands China's military alongside Xi, having fallen, the "chairman responsibility system" is expected to be further strengthened. Li said, "In the new year, we must thoroughly implement Xi's thinking on strengthening the military and carry out the military strategic guidelines for the new era," adding, "We must safeguard the Party's absolute leadership over the People's Liberation Army and thoroughly and fully implement the Central Military Commission chairman responsibility system."
Only principled remarks were made regarding Taiwan and the international situation. On Taiwan, Li said, "We will adhere to the one-China principle and the 1992 Consensus, resolutely crack down on the 'Taiwan independence' separatist forces, and oppose external interference. We must promote the peaceful development of cross-strait relations and advance the great cause of national reunification." On the international situation, he said, "We will uphold an independent foreign policy that seeks peace, follow the path of peaceful development, expand international cooperation networks, firmly reject hegemonism and power politics, and safeguard international fairness and justice."