China: Growth target softening and policy mix – ING

ING’s Chief Economist for Greater China, Lynn Song, notes that China has lowered its 2026 GDP growth target to 4.5–5.0% after three years of “around 5%”, signalling tolerance for slightly slower expansion while keeping long-term ambitions intact. Fiscal and employment targets remain broadly stable, and ING forecasts GDP growth of 4.6% year-on-year, within the new official range.

Lower growth band but ambitions intact

"This year's GDP growth target was reduced to 4.5-5.0%, a slight softening from the more ambiguous "around 5%" target set in the past three years. While it was debatable how much flexibility "around 5%" entailed, most market participants viewed this as within 0.2-0.3pp of 5%. With the new target, there appears to be a tolerance for slower growth, which should give policymakers more flexibility to pursue quality growth, a priority in recent years."

"With that said, the 4.5% threshold represents only a rather limited slowdown; China's longer-term growth ambitions remain unchanged. The government work report outlined an intention for "laying a solid foundation for doubling per capita GDP by 2035 compared to 2020," a key goal set by President Xi in the past."

"The softer GDP target was in line with our expectations, as we had hints of this outcome earlier when various provinces also revised growth targets lower. Our GDP forecast for the year is 4.6% year-on-year, which would fall within this range."

"In our view, this suggests that while growth stability remains an important objective, the stable fiscal deficit and bond issuance targets indicate a degree of restraint, avoiding relying too much on extra stimulus to drive growth at the cost of growth quality. This may disappoint some watchers who had hoped for a stronger fiscal stimulus push."

"What does this mean for China's economy? The trends we have seen in the past few years are likely to continue, with an increased focus on moving up the supply chain and improving tech self-reliance. The big question mark will be how successful China is in boosting its domestic demand, as domestic confidence remains tepid and continues to restrain this effort."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)