China sets a lower, pragmatic growth rate for 2026-30

Chinese Prime Minister Li Qiang had placed before the National People’s Congress (NPC) economic growth target of 4.5 per cent to 5 per cent. This is adjusting the growth rate a little below 5 per cent, which has been the norm for the last three years. China had grown furiously for over three decades at 10 per cent annually, but it had to make the 6 per cent growth the new normal.

In the last few years, the growth figure had to be adjusted downwards. Shen Danyang, who headed the group which drafted this year’s work report, said, “The target of 4.5 per cent to 5 per cent economic growth, while striving to achieve better results, is intended to strike balance between what is needed and what is feasible,” according to China’s Xinhua news agency.

Shen also said that “the target range leaves room for structural adjustment risk prevention and reforms while remaining broadly aligned with the country’s 2035 vision”, which includes doubling the 2020 per capita income by 2035, and to attain the status of a moderately developed economy.

He clarified further, “As long as we make full and effective use of all favourable conditions, we can fully strive for better results, achieving a tangible improvement in quality and a reasonable increase in quantity.” There is also the recognition that economic climate at home is not at its best. Chen Changsheng, member of the work report, said policy support will be strengthened to tackle external uncertainties and a “strong supply-weak demand” pattern at home.

There is awareness on the party of policy-makers and decision-makers that China’s domestic consumption is weakening, and that there is a tightening of the belt of the consumers because of the slump in the property sector, and people are holding back on their expenditure. But Chinese authorities do not want to launch a stimulus which will push people to spend. They feel that it has to happen gradually. Prudence is the watchword of the Chinese government.

China is also focused on what it needs to do. President Xi Jinping wants to prioritise the semi-conductor industry and the Artificial Intelligence (AI) segment. He is well aware that China is lagging behind America in this and he wants to close the gap. China observers in America and elsewhere are quite sure that China is putting in fierce effort to catch up with America, and China could overtake America any time soon. So China is increasing its allocation in research and development (R&D). There is a 7 per cent increase for R&D. China also has set a target of decreasing carbon emission by 17 per cent per GDP unit between 2026 and 2030.

Despite predictions that the second largest economy in the world is in decline, China had maintained its momentum and it has remained at the second position. There is no challenge to its position because the other economies, that of Japan, India and Germany, are trailing far behind. There is no prospect of China falling off its perch.

The Chinese economy has grown so big that it can afford to live with a lower growth rate without its economic power being affected. Chinese leaders are also quite realistic about their economic growth. They are aware that even they did achieve all that they want to, China would remain a modestly prosperous economy.

This is because of the population. China has the second largest population, next to India. Chinese economy is anchored in the hard reality of a fluctuating global market. So, it has built a domestic consumer base which can sustain its growth. Unlike many other economies, China is not wholly dependent on exports.