Beijing: China on Thursday lowered its GDP target to 4.5 to 5 per cent for this year in the face of Trump’s trade tariff war, the worsening global crisis following the US-Iran war and headwinds in the domestic economy, owing to a property market slump and unemployment crisis.
The target close to that of last year was announced by Chinese Premier Li Qiang in his work report presented to the annual National People’s Congress (NPC), the country’s parliament, which opened here on Thursday.
China has been setting a five percent target for the GDP for the last three years amid growing domestic economic challenges. This year, the target is lowered to 4.5 per cent to 5 for the first time.
China also released its 15th five-year plan, and as widely expected, pledged investments in innovation, high-tech industries, scientific research, and a “notable” – but unspecified – increase in household consumption as a share of economic output.
“The policy signal is loud and clear: guided by a pragmatic growth target of 4.5% to 5%, China will focus on technology advancement while adopting a more proactive fiscal policy and a strategy of expanding domestic demand.
“The downward tweak of the economic growth target is aimed at creating space for high-quality growth in areas such as technology and high-end manufacturing. We expect an adjustment in interest rates and RRR in the second quarter. There will be more structural stimulus toward technology development.”
“It is broadly in line with market expectations, given that recent GDP and consumer spending figures have shown signs of weakness.
By lowering the growth target to the 4.5%-5.0% range, it aligns more closely with the Q3-Q4 2025 GDP data we have been observing. China has also traditionally been conservative in setting its economic forecasts, so this should not come as a surprise. The target likely factors in the U.S. tariffs as well, which are expected to remain a headwind to growth.”
“The policies are generally mild, without aggressive moves. It shows the government seeks to keep the economy stable and curb volatility in either direction. The report obviously has not taken into account the Iran conflict.
“If Iran surrenders, that’s very negative to China, which counts the Strait of Hormuz as a crucial trade route. Today’s China market rise is inspired by an overnight rebound in U.S. stocks.
“China’s ‘National Team’ investors may also be tasked with steadying the market around the NPC meeting. Whether the oil price hike is fleeting or lasting depends on whether the Iran conflict will end soon or develop into a war of attrition.”
“It indicates that they are comfortable with slowing headline growth. The focus is to stabilise the economy, not to significantly lift growth. These are very pragmatic targets that we are seeing from China.
“The focus for the government is very clear. High-tech growth and private consumption need to be raised into the medium term. But consumption has been lagging and weighed down by the property sector, so it won’t be so easy to lift this in the short term. Whereas exports and the manufacturing sector – I think those will be the key growth engines this year.”
