China’s Two Sessions to project stability with expected GDP trim, cautious diplomacy

BEIJING – When China’s annual political gathering kicks off on March 4, few expect headline-grabbing policy surprises.

Instead, China watchers and investors are expecting Beijing to project steadiness, with a possible modest trim to the growth target, targeted fiscal support and a controlled diplomatic tone ahead of US President Donald Trump’s visit later in the month.

Thousands of delegates from across the country will gather in Beijing for parallel sets of meetings of the National People’s Congress (NPC), or Parliament, and the Chinese People’s Political Consultative Conference, an advisory body comprising experts, business leaders, celebrities and representatives from political parties other than the ruling Communist Party of China.

After years of property turmoil and deflationary pressures, the central question at the Lianghui, or Two Sessions, is whether Beijing can keep growth at “around 5 per cent” – the target for the last three years – without resorting to significantly stronger stimulus.

With two-thirds of Chinese provinces already trimming their own targets, many economists expect Premier Li Qiang to

lower the national gross domestic product (GDP) target to a range of 4.5 per cent to 5 per cent

when the NPC opens on the morning of March 5.

Of the 31 provinces, 21 have lowered growth targets compared with in 2025, either by reducing the numerical goal or by shifting from “above” a certain rate to “around” that rate.

Lowering the GDP target would allow policymakers greater flexibility amid demographic headwinds, uneven consumption and geopolitical uncertainty, including rising tensions in the Middle East following the recent US-Israeli attack on Iran, said analysts.

Macquarie Group’s chief China economist Larry Hu said in a research note that a lower range does not necessarily signal a willingness to tolerate slower growth. Chinese policymakers have historically calibrated policy tools to meet – but not miss nor significantly exceed – their headline target.

“For most investors, the difference between 4.7 per cent and 5 per cent is small. What truly matters is not the headline growth but where the growth comes from, whether external or domestic demand,” said Mr Hu.

If exports remain strong, Beijing may tolerate weak domestic consumption, he said.

“Conversely, if exports falter, they may step up domestic stimulus to defend the GDP target.”

In recent years, exports have been the brightest spot in China’s economy, offsetting weak domestic demand. But economists have long warned that relying on external demand and industrial overcapacity is not sustainable, particularly amid rising trade frictions.

UBS Securities chief China economist Yu Song said in a research note that the lower bound of a range target should not be interpreted as comfort with 4.5 per cent growth. In the past, “around 5 per cent” targets were treated as floors rather than ceilings, he noted.

Observers believe that China’s growth will moderate in 2026, with the World Bank forecasting 4.4 per cent and

the International Monetary Fund projecting 4.5 per cent.

On March 5, Premier Li will also deliver the government work report, recapping efforts made in 2025 and setting out priority areas for 2026.

Besides the GDP target, investors will watch whether Beijing maintains its inflation target at around 2 per cent, keeps the fiscal deficit target at around 4 per cent of GDP, and reiterates employment goals such as creating more than 12 million new urban jobs. All these are indicators of how much policy support the authorities are prepared to deploy.

The 2026 meetings mark the start of the 15th Five-Year Plan, a blueprint expected to set priorities across economic development, technology and innovation, people’s livelihoods, green transition, and social security for 2026 to 2030.

The new plan comes at a pivotal moment. China is grappling with slower structural growth, technological rivalry with the US, and mounting domestic pressures from an ageing population and youth unemployment.

Chinese President Xi Jinping has said that the 15th Five-Year Plan will play an “important bridging role” between the 20th Party Congress in 2022 and his goal of “basically realising socialist modernisation” by 2035.

Analysts expect the emphasis to remain firmly on industrial upgrading, technological self-reliance, and building what officials call a “strong domestic market”.

Mr Neil Thomas, a fellow on Chinese politics at the Asia Society Policy Institute’s Center for China Analysis, said the defining shift of the 15th Five-Year Plan is the further institutionalisation of a state-guided growth model that prioritises technological leadership and industrial self-reliance.

A key watchpoint is whether Beijing will meaningfully boost consumption alongside its continued prioritisation of industrial self-reliance, he told The Straits Times.

“The clearest signal will be whether new binding targets and fiscal resources are introduced to increase household income, services and consumption as a share of GDP,” said Mr Thomas.

At China’s annual

Central Economic Work Conference

in December 2025, leaders pledged “a more proactive fiscal policy” and a “moderately loose monetary policy”, while stressing the need to stabilise employment, enterprises and markets to ensure a strong start to the new five-year cycle.

Beyond economic targets, any foreign policy signals emerging from the meetings, particularly at Foreign Minister Wang Yi’s annual press conference, will be closely parsed for clues on how Beijing intends to manage ties with both the US and regional neighbours such as Japan.

With

Mr Trump expected to visit China later in March,

though Beijing has yet to confirm the trip, many anticipate a measured tone emphasising stability and openness to trade.

Ms Helena Legarda, head of programme for the foreign relations team at Berlin-based think-tank MERICS, told reporters in a Feb 27 media briefing that Beijing is unlikely to rock the boat before securing its desired outcomes from the meeting with Mr Trump.

“But we can expect the usual veiled criticism of US policies along the lines of power politics, hegemony, protectionism, and China positioning itself as a more responsible country,” she said.

The Two Sessions come amid continued turbulence within the People’s Liberation Army (PLA) following a sweeping anti-corruption campaign that has hollowed out the military’s upper ranks.

Nine military officials were recently removed from the NPC delegate list, weeks after Beijing opened an investigation into top general Zhang Youxia, one of China’s most senior serving officers and Mr Xi’s second-in-command within the military.

While the removals underscore that Mr Xi’s anti-graft campaign in the PLA remains active, the Two Sessions themselves are unlikely to signal major shifts in defence priorities, as significant personnel announcements are uncommon at the annual gathering.

UBS’ Mr Song said the most important signals at the Two Sessions lie not in the headline targets and rhetoric, but in the comments of the top leadership in small group discussions after the government work report.

“The contents of these verbal comments are often new and reveal the focus at that moment,” he said.