BEIJING – China on Thursday announced its lowest growth target in 35 years,
as the world’s second-largest economy grapples with domestic challenges and rising uncertainty around the world.
This year, China will aim for 4.5% to 5% growth in gross domestic product “while striving for improvement in behaviour”, China’s No. 2 official, Premier Li Qiang, said in a “work report” delivered at Beijing’s Great Hall of the People during the opening session of the National People’s Congress, China’s biggest political event of the year.
The figure, the country’s lowest since 1991, pales in comparison to the 5% target achieved last year and marks the first formal decline since 2023. It is an acknowledgement that China’s growth is slowing as the model that has supercharged its economy for decades is beginning to reach its limits.
“While recognising our achievements, we are also clear-eyed about the difficulties and challenges we face,” Lee said in his more than an hour-long address. During this time he read most of the 35-page report.
Thousands of delegates have gathered in Beijing for the National People’s Congress, where the ruling Communist Party sets economic goals, makes policies and sends signals to the rest of the world. The event, overseen by Chinese leader Xi Jinping, is finely scripted and almost entirely premeditated to demonstrate leadership focused heavily on stability.
It comes just weeks before President Donald Trump travels to China for a meeting with Xi in which the two leaders will try to salvage a fragile trade truce. US-Israeli attacks on Iran, a country with close ties to Beijing, have further complicated the highly anticipated meeting.
China has long been trying to rebalance its export-dependent economy by boosting domestic demand while addressing structural issues, including asset declines, industrial overcapacity and rising local government debt.
It is also investing heavily in cutting-edge technologies such as artificial intelligence and robotics as it competes with the US for global dominance in those industries.
Li said the government would implement economic policies “against US tariffs,” which have differed significantly since Trump started a trade war with China upon his return to office last year. Although China’s exports to the US have fallen sharply due to tariffs, it sells more products than anywhere else in the world, and last year it had a record trade surplus of nearly $1.2 trillion.
According to a separate government budget report, defence spending will increase by 7% to more than $275 billion, down from 7.2% last year and broadly in line with recent years. China, which has recently seen mass layoffs of senior military officers, aims to modernise its military by 2035 amid rising tensions in the region, including the island of Taiwan claimed by Beijing.
“We will make concrete gains in military training and combat preparation and accelerate the development of advanced combat capabilities,” Li said in his speech.
China, despite a slightly lower growth target than anticipated, is striving to project confidence amidst uncertainty and pressure. But the picture has been complicated by the war in Iran, China’s long-time strategic partner.
China has been a lifeline for heavily sanctioned Iran, buying 80% of its crude imports in exchange for deep rebates. However, they only make up 13% of China’s overall oil imports and are easily replaceable.
Beijing is more concerned about the Strait of Hormuz, a narrow shipping route that Iran has effectively closed in retaliation for US-Israeli attacks. China, the world’s largest energy importer, depends on the strait for a third of its oil imports and a quarter of its gas.
Although China has spent years building up its reserves, which analysts say could offset an immediate supply shock, an extended conflict threatens its economic interests throughout the Middle East.
Iran is the second Chinese partner to be the target of US military action in two months, following the surprise capture of Venezuelan President Nicolas Maduro in January. Beijing has criticised attacks on Iran, as it has criticised the US attack on Venezuela, but it is unlikely to provide more than rhetorical support.
Stability amid international turmoil is a key theme for China’s leadership, which favours a US-dominated “multipolar world”, but Beijing is also keen to maintain stability in its relations with Washington, meaning the Iran attacks are unlikely to delay or derail Trump’s visit to China, which the White House says will begin on March 31.
In his speech, Li talked about the “positive results” of the five rounds of US-China trade talks and said economic and trade cooperation between the world’s two largest economies was at a “more stable level.”
China’s economic plans have been complicated by its ageing and rapidly shrinking population, with officials prioritising more marriage and higher birth rates a decade after ending the controversial one-child policy. The country of 1.4 billion people is facing the same demographic crisis as the US and many other countries, with young people increasingly postponing marriage and starting families or deciding not to have children.
Lee proposed creating a “childbirth-friendly society” over the next five years with changes to education and health care. Many young people in China complain that raising children is expensive and there are few job prospects.
With over a fifth of its population over the age of 60, China is also trying to improve services at the other end of the age group with initiatives to boost the so-called silver economy. Lee said the government will expand sports programmes and increase the number of beds in elderly care facilities.
