[Weekend Money] Why Did China's NPC Lower Its Growth Target?

by Hwang Seoyul

Published 07 Mar.2026 09:47(KST)

This year, the National People's Congress (NPC) of China has lowered its target for gross domestic product (GDP) growth. This move is seen as a recognition of the limitations of an export-oriented growth structure, and as a risk-minimization strategy ahead of the Party Congress, which will determine whether President Xi Jinping will serve a fourth term.

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On March 7, Baek Gwanyeol, a research analyst at LS Securities, explained that the adjustment of China's GDP growth target from the previous 5% to a range of 4.5-5% reflects the government's acknowledgment that the country's export-driven growth model cannot be sustained structurally. He added, "With the 21st Party Congress scheduled for October next year, China is avoiding the risk of setting an aggressive target."

The GDP growth target announced at the NPC, which began the previous day, marks the first time since 2023 that the target has been revised downward with a conservative stance. Other key economic goals remain unchanged, including a fiscal deficit ratio of 4%, 4.4 trillion yuan in special-purpose local government bonds, 1.3 trillion yuan in special treasury bonds, a consumer price index (CPI) increase of 2%, and an unemployment rate of 5.5%.

Baek commented, "As could be anticipated from the change in wording at the Central Economic Work Conference last December, there are no surprise factors that would surpass last year's level of stimulus." The change in wording he referred to involves the removal of the phrase "ultra-strong" from what was previously "strengthening ultra-strong counter-cyclical adjustments."

However, despite the downward revision of the growth target, Baek expects the policy stance of economic stimulus to continue. "Since 2026 marks the beginning of a new Five-Year Plan, it appears that the focus has shifted from short-term stimulus last year to considering sustainable growth," he said. "There is also the rationale that guidelines for the 15th Five-Year Plan, which reaffirmed the goal of more than doubling per capita GDP from the 2020 level by 2035, were presented together."

Meanwhile, a significant portion of the discount factors in the Chinese stock market, such as prolonged US-China tensions and the ongoing slump in the real estate market, appear to have already been priced in, suggesting a more positive outlook compared to the past. Baek predicted, "As we can see from this year's NPC, the scale of China's stimulus measures is substantial in absolute terms, and the continuation of a stimulus stance may provide ample liquidity to support the stock market."

However, he also cautioned, "Even though China's growth rate remains high compared to other countries, there are doubts as to whether it still warrants the same premium as in the past. Furthermore, as US-China tensions intensify, there are clear concerns that China could be exposed to new risks such as stagflation, which could become significant obstacles."