What to Watch as China’s Leaders Hash Out Plan for Econ…

China’s leadership is meeting in the shadow of crises abroad this week, as it puts the finishing touches on its blueprint for growth through 2030 and unveils plans to insulate the economy from global turmoil.

China’s leadership is meeting in the shadow of crises abroad this week, as it puts the finishing touches on its blueprint for growth through 2030 and unveils plans to insulate the economy from global turmoil. You can save this article by registering for free here. Or sign-in if you have an account. (Bloomberg) — China’s leadership is meeting in the shadow of crises abroad this week, as it puts the finishing touches on its blueprint for growth through 2030 and unveils plans to insulate the economy from global turmoil.

Premier Li Qiang is set to reveal economic targets for 2026 on Thursday, when the annual parliamentary session starts in Beijing, with a lower growth goal a possibility for the first time since 2023. Even more far-reaching is the government’s economic program for the next five years, whose full text will be officially passed toward the end of the event that usually lasts about a week. The cascading conflicts around the world make the decisions unusually high stakes, as the fallout spreads from the war in the Middle East after US and Israeli strikes hit Iran.

This year’s gathering comes just weeks before a summit between Chinese leader Xi Jinping and US President Donald Trump to discuss their tariff truce. By signing up you consent to receive the above newsletter from Postmedia Network Inc. A welcome email is on its way. If you don't see it, please check your junk folder. Apart from the economy, China watchers will also be studying other clues at the National People’s Congress.

Against the backdrop of Xi’s biggest purge of the army in roughly half a century, it will provide an occasion to monitor signs of additional ousters if any officials are missing from the thousands of delegates, including provincial governors, military officers and business leaders.  Despite the highly choreographed nature of the NPC, it offers a rare chance to get a sense of the Chinese leadership’s thinking.

For now, Beijing is unlikely to tinker with plans drafted months ago, sticking to a measured approach to stimulus in 2026 and adjusting it later in the year if needed.  “With limited fiscal and monetary space, they accept slower growth and will avoid aggressive stimulus unless severe internal or external shocks force their hand,” said Jacqueline Rong, chief China economist at BNP Paribas SA. “What’s worth watching is the roadmap to self-sufficiency in key technology, energy and raw materials,” she added, as the crisis around Iran “likely reinforces Beijing’s determination to prevent supply shocks.” With exports staying resilient and a recent US court ruling removing Trump’s key tariff leverage over China, the government may shift away from crisis mode and announce only a marginal expansion in this year’s broad budget deficit while keeping the option of extending more aid later in the year if necessary.

Purchasing managers’ index figures released on Wednesday painted a mixed picture of the world’s second-biggest economy. While the official manufacturing PMI remained in contraction in February, slumping to the lowest in four months, a private poll of the industry showed activity among smaller and more export-oriented firms rose to the strongest in over five years.  For 2026, many economists anticipate a reduction in Beijing’s goal for growth in gross domestic product after most provincial governments lowered their targets at regional legislative gatherings.

Major banks and brokerages including Goldman Sachs Group Inc. and Citic Securities Co. forecast officials will target growth in the range of 4.5%-5% this year, down from around 5% in 2025. Such a pace would remain above the 4.17% average annual gain the government deems necessary for the next decade to achieve the goal of doubling per capita GDP between 2020 and 2035. “Activities are generally slowing,” Raymond Yeung, chief economist for Greater China at Australia & New Zealand Group Ltd., said after the PMI reports.

“The geopolitical development and tariff uncertainties present additional downside risk. This backdrop may trigger some policy action, despite a potentially lower GDP target to be announced tomorrow.” “China could move toward a more flexible approach to its 5% growth goal. Widespread cuts to provincial targets are increasing pressure on Beijing to adjust the national goal.”  For the 15th Five-Year Plan, an inclusion of a numeric aim for consumption’s share in GDP would send a strong signal that China is committed to rebalancing its export-dependent economy.

Also in focus are plans to advance Beijing’s tech push to power future growth and create jobs, such as the ambitions for artificial intelligence and other emerging industries.  China is more willing to tolerate slower growth as officials experiment with ways to spur consumer spending and become pickier with investment. Support for the property market will likely stay muted. A conservative growth target would reduce the prospects of forceful stimulus, since the government is grappling with challenges ranging from mounting debt pressure to shrinking profit margins at state banks.  Most economists anticipate the government will opt to keep the official budget deficit — a close proxy for its policy easing — at a record 4% of GDP and boost only slightly the special bond issuance quota.  Social spending is set to keep rising following rapid gains last year to encourage consumption, even if subsidies for household purchases of consumer goods may be dialed back.

With Beijing doubling down on its push for technology innovation and industrial upgrades, the urgency is also on the rise to strengthen labor protections in an effort to increase people’s incomes and maintain social stability. Higher minimum wages, more expenditure to improve the social safety net and continued subsidies for child and elderly care could all be on the cards to “cushion labor-market pressures during the structural transition, stabilize household expectations and reduce precautionary savings,” Standard Chartered Plc economists including Ding Shuang wrote in a note.

   Efforts to boost consumption will require more support from the national government. Most provinces have lowered their targets for retail sales growth by around 1 percentage point to 4%-5% for this year, suggesting insufficient confidence after failing to meet last year’s goals, according to a report released by researchers at Renmin University this week. More fiscal resources could be directed to stabilize investment after top leaders vowed to stop its unprecedented slump.  But a strong rebound is still in doubt, after Xi’s warning against wasteful investment and debt risks and as the government pushes ahead with its campaign to rein in excess manufacturing capacity.

The cautious stimulus strategy means deflationary pressure could persist, leaving businesses and households feeling less well-off than suggested by the headline GDP growth, which measures the economy by adjusting for price changes. However, the oil rally caused by the war in Iran, if sustained, could accelerate a rebound in industrial prices. Along with annual targets for this year, China will make public its five-year blueprint for economic and social development.  Dating back to the 1950s, such documents remain a prominent tool for leaders to signal priorities, even after the country’s transition toward a market economy over the past four decades.  The broad strokes of the plan are already known — the Communist Party published a proposal in October following a major conference.

Back then, Party leaders pledged to “significantly” boost the share of consumption in the economy, even though tech self-reliance and manufacturing were listed as higher priorities.  HSBC Holdings Plc economists say it’s possible China will pursue a share of 45% from the current about 40%, while Asia Society analysts see a potential goal of between 42% and 47%.  In the absence of a numeric goal, concrete measures such as plans to increase household incomes or boost births will show if authorities are determined to support consumption.  Details on expanding the payout of basic pensions will be in focus, with another potential change centered around taxes.  Policymakers may introduce higher taxes on beverages with the highest sugar content, the Financial Times has reported, which could be part of reforms to encourage local governments to promote consumer spending.  A bigger focus of the plan may be on technology and future industries.

Investors will be on the lookout for clues to any state funding, subsidies or other incentives for specific industries. Infrastructure projects are another highlight, as China targets a batch of major construction programs every five-year period. Markets will assess the scale of state-led projects to determine the outlook for investment, an important pillar of the economy that contracted for the first time on record in 2025.

“They’ve said their major task is to increase the technological capacity of the economy, focus on tech-intensive manufacturing,” Arthur Kroeber, founding partner at Gavekal Dragonomics, said in a Bloomberg TV interview on Tuesday. “Since they’re not really changing that overall strategic orientation, they can’t really offer anything serious on a major shift toward consumer spending.” (Updates with PMI figures, ANZ comment starting in eighth paragraph, Renmin University report in 18th.) Postmedia is committed to maintaining a lively but civil forum for discussion.

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This report covers the latest developments in artificial intelligence. The information presented highlights key changes and updates that are relevant to those following this topic.

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