Caution and Continuity

For many Chinese people, the most important item on the agenda is how economic growth can be consolidated and benefit their livelihoods.

As the most watched figure in the annual event, the growth target signaled a subtle but significant shift in China's economic policy.　

For the past three years, China set a GDP growth target of "around 5 percent." This year, China opted for a range, which analysts say indicates that decision-makers acknowledge the uncertainty and constraints its economy will face.　

According to the government work report, setting the growth target with a range leaves room for structural adjustment, risk control and reform in the opening year of the 15th Five-Year Plan (2026-2030), laying the groundwork for better performance in the coming years and aligning with growth potential in the longer term. It marks a more cautious approach at a time when the global environment is becoming more unpredictable and China's own economic transition is far from complete.　

"Given the increasingly complex domestic and international environment, a 4.5-5 percent growth target gives policymakers room to respond flexibly to uncertainty," Dong Yu, executive vice dean of the China Institute for Development Planning at Tsinghua University told NewsChina.　

Setting a range is unusual but not unprecedented. China adopted a similar approach in 2016, during the early phase of supply-side structural reforms, and again in 2019, when the economy was under pressure after the US launched a trade war against China during the first term of US President Donald Trump.　

According to Zhang Liqun, a research fellow with the Development Research Center of the State Council, when the government sets a single number, it usually signals greater confidence in the growth trajectory. A range, by contrast, allows room for policy maneuvers. Therefore, the return to the range format suggests that policymakers see the outlook for of China's economy as unusually complex. "It indicates that the economic environment is complicated and uncertain," Zhang told NewsChina.　

Chinese officials emphasized that the target should be read with nuance. At a briefing held by the State Council Information Office, Shen Danyang, head of the drafting group for the government work report and director of the State Council Research Office, said the goal effectively consists of "two parts": achieving 4.5-5 percent growth while striving for better results in practice. The formulation, he said, reflects a balance between economic needs and practical constraints.　

Shen said that the growth target needs to be understood in the context of China's long-term ambitions. According to China's "2035 long-range objectives," a national development vision adopted in 2020 that aims to "basically realize socialist modernization by 2035," the country needs to double the size of its economy compared with 2020. According to Shen, China would need average annual growth exceeding 4.17 percent over the next decade to achieve the 2035 target of doubling per capita GDP from 2020. In that sense, a 4.5-5 percent growth target preserves a margin of safety.　

According to Su Jian, a professor of economics at Peking University, the range marks a compromise between ambition and prudence. "Too low a rate makes long-term goals difficult to achieve and a rate too high risks misallocation of resources," Su said, adding "The current range balances efficiency with stability."　

Su noted that many local governments appear to be taking the same pragmatic approach, with some of China's large provincial economies, such as Guangdong and Jiangsu, adopting growth targets within the 4.5-5 percent range.

According to Zhang Liqun, China's production capacity could support faster growth, but weak domestic demand, reflected in a lack of orders, is holding firms back, creating a mismatch between strong supply and weak demand. The priority, he argued, is to boost demand, unlock supply potential and revive growth momentum.　

This perhaps is why the government work report once again places expanding domestic demand at the top of its economic agenda. But this year, the emphasis has shifted subtly. Rather than focusing solely on boosting consumption, policymakers are increasingly concerned with the underlying determinants of spending, particularly household income.　

"Macroeconomic analysis cannot focus on aggregates alone," Su Jian said." More important are issues such as the distribution of household and government incomes, the structure of household earnings and unemployment. These factors determine whether people have the capacity to spend, and in turn, whether domestic demand can truly expand."　

In the government work report, policymakers pledged to create a comprehensive plan to raise urban and rural household incomes, including measures to boost earnings among low-income groups, expand property income and improve wage and social security systems. For Dong Yu, the emphasis suggests a move from short-term stimulus toward structural solutions. "In the past, the focus was on encouraging consumption," he said. "Now the government is addressing the root of the problem: income."　

According to Su Jian, China's past growth model prioritized investment in "things," notably fixed assets, infrastructure and headline GDP expansion. But as the economy matures and the return on such investment diminishes, the next phase of development must focus more on human capital and social welfare, or "investing in people," a concept now increasingly prominent in policy discourse.　

"In the past, people were primarily viewed as the means of growth generation," Su said. "As development enters a new stage, more attention must be paid to enhancing people's well-being, which should be the ultimate objective of economic development." Such an approach, he added, entails stronger support for social policies, including education, healthcare, social security, pensions and taxation reforms.　

According to the report, the government will create over 12 million new urban jobs and keep the surveyed urban unemployment rate at around 5.5 percent. To achieve these goals, China will adopt its most expansive fiscal policy in recent years, with a targeted deficitto-GDP ratio of 4 percent. For decades, China kept its fiscal deficit below the widely cited 3-percent threshold. The ratio was raised to 3.6 percent during the 2020 pandemic, adjusted to 3.8 percent in 2023, and set at 4 percent in 2025.　

For 2026, the government has opted to maintain the deficit at 4 percent, with the absolute shortfall reaching 5.89 trillion yuan (US$855.3b), up from 5.66 trillion yuan (US$823.5b) in 2025 and a historic high. In addition, the government announced it will issue 1.3 trillion yuan (US$188.8b) in ultra-long special treasury bonds, 4.4 trillion yuan (US$638.9b) in local government special bonds, and 300 billion yuan (US$43.6b) in special sovereign bonds.　

Including official deficits, the effective scale of fiscal expansion approaches 12 trillion yuan (US$1.7t), which appears to indicate a significant policy shift toward using government spending to directly bolster household income and consumption.　

Professor Tian Xuan with Peking University told NewsChina that keeping the 4 percent deficit ratio would both avoid debt risk and secure public spending in key areas to stabilize enterprise investment and household consumption expectations.

Instead, it outlines a broad set of development objectives across multiple sectors, reflecting an increasingly people-centered approach that focuses on innovation, sustainable development and long-term economic stability.　

In areas of public well-being, it proposes to raise life expectancy from 79.25 years in 2025 to 80 over five years, to increase the average years of schooling to reach 11.7 years from 11.3 years in 2025, and increase the coverage of community eldercare facilities, as well as upgrade existing care facilities and boost community support. The report also pledges to promote high-quality full employment, improve the income distribution system and refine the social security system.　

In guiding economic restructuring, the report states the government will ensure that nationwide R&D spending grows by at least 7 percent annually, outpacing GDP growth as China seeks to reduce its reliance on foreign technologies. Other objectives to achieve by 2030 include raising the value added of core digital industries to 12.5 percent of GDP, from the current level of 10 percent, and reducing carbon dioxide emissions per unit of GDP by 17 percent.　

The report also proposes a total of 109 major projects in six areas, which has "critical importance to China's current and long-term development," up from 102 major projects in the 14th Five-Year Plan (2021-2025). According to Zhang Liqun, government spending on infrastructure remains key to supporting both China's short-term and long-term goals.　

"China's structural shifts still present substantial opportunities for government investment," Zhang told NewsChina. "Increasing infrastructure spending, especially in public goods, could help counteract market-driven declines in demand."　

But Zhang warned that many of China's existing policy tools are gradually losing potency. Programs such as large-scale infrastructure projects, industrial upgrading initiatives and consumer trade-in subsidies have already been deployed extensively in recent years. As their marginal impact declines, policymakers may need to develop new instruments to promote domestic demand.　

For many, the key may lie in a more decentralized approach. This year, the government allocated 4.4 trillion yuan (US$638.9b) in local government special-purpose bonds, which will be primarily used to support major infrastructure projects, replace hidden debt and help settle overdue government payments.　

In late 2024, the central government launched a pilot "self-auditing and selfissuing" mechanism for local government special-purpose bonds, giving local authorities greater autonomy over project approvals. Under the scheme, approved provincial projects can proceed directly to issuance without mandatory review by national ministries. In January, authorities indicated plans to expand the pilot beyond the current 10 provinces and municipalities to cover a wider region.　

"This could help relieve the funding constraints that have held back local governments' investment efforts and may be key to reversing the current contraction in demand," Zhang said. "With coordinated action from both central and local authorities, we can ensure a strong start to the 15th Five- Year Plan."