Slowing economy, tricky external ties: China has plate full as annual Two Sessions close

BEIJING – The annual meetings of China’s legislature and top political advisory body, collectively known as the Two Sessions, concluded in Beijing on March 12, cementing a policy blueprint for the world’s second-largest economy to bet big on technological innovation and industrial modernisation over the next five years.

After eight days of deliberation, more than 2,700 Chinese lawmakers approved the 135-page 15th Five-Year Plan, which sets the nation’s development trajectory until 2030.

The document also outlines the hefty agenda that policymakers across the country face as they work to plug domestic gaps while navigating a fracturing global order.

At the closing session of the National People’s Congress (NPC) on March 12, Mr Zhao Leji, chairman of the Parliament’s standing committee, spoke to rapturous applause as he called on legislators to turn China’s “grand vision” into a “beautiful reality”.

“In accordance with the arrangements made at this meeting, we must carry out all tasks in a solid and effective manner, remain steadfast in managing our own affairs well (and) strive to achieve a good start for the 15th Five-Year Plan,” he said.

The NPC also approved the central government’s annual work report, which sets out China’s goals for 2026, by a near-unanimous majority of 2,759 votes. One lawmaker voted no, while two others abstained.

The spotlight at the 2026 Two Sessions remained on China’s headline gross domestic product (GDP) growth target, which was trimmed to a range of 4.5 per cent to 5 per cent – its lowest level since 1991.

This was in line with expectations of most China watchers, as were the 2026 targets for inflation (2 per cent) and the fiscal deficit (4 per cent of GDP).

Calling it a “non-event for investors”, Macquarie Group’s chief China economist Larry Hu said in a note that where China’s growth comes from is what matters. He said China’s policymakers may continue to tolerate weak domestic consumption if exports, which surged 21.8 per cent in the first two months of 2026, remain strong.

UOB economist Ho Woei Chen said a greater tolerance for slower growth will allow Beijing to focus on longer-term economic restructuring as it pivots towards consumption.

Commerce Minister Wang Wentao told reporters on March 6 that Beijing will promote more balanced trade by boosting imports. It will also do more to boost the services sector and expand consumption in China’s less-developed cities.

Another key theme at the Two Sessions was the growing ubiquity of artificial intelligence.

Questions about AI development and its risks dominated media interviews with delegates from the tech sector, academia and manufacturing industries.

Minister of Human Resources and Social Security Wang Xiaoping acknowledged the profound impact AI is having on the country’s fragile job market. She reassured the public that stabilising employment is a priority while Beijing studies how AI can be harnessed to create new jobs and upgrade traditional roles.

Other domestic issues that received an airing included calls to build a healthier China and proposals to raise record-low birth rates. Laws on ethnic unity and national development were passed, while existing environmental laws were codified with explicit regulations on low-carbon development.

On the international stage, China also has much to do as it seeks a more proactive role in global governance.

As the widening conflict in the Middle East hung a cloud over proceedings, China’s top diplomat Wang Yi used a largely measured tone while fielding questions on a range of thorny issues at an annual press conference.

The Foreign Minister avoided direct criticism of US action, instead lauding the results of extensive “head-of-state diplomacy”, which he said had allowed for overall stability in China-US relations ahead of a high-stakes summit between Chinese President Xi Jinping and his US counterpart Donald Trump.

Mr Wang was also upbeat about Beijing’s ties with Europe despite discord over a growing trade imbalance. On the disputed South China Sea, he expressed optimism that consultations with ASEAN on a code of conduct would be completed in 2026 despite historically slow progress.

The “red line” issue of Taiwan elicited sterner words. Mr Wang criticised the island’s ruling Democratic Progressive Party and issued not-so-veiled warnings to Japanese Prime Minister Sanae Takaichi, whose suggestion that a Chinese use of force against Taiwan would justify a military response by Tokyo kicked off a months-long diplomatic row.

Analysts noted the stronger language used on the Taiwan issue in China’s 2026 government work report, including to “resolutely fight against separatist forces aimed at ‘Taiwan independence’ and to oppose external interference” – all pointing to a greater resolve by Beijing to push ahead with reunification in the next five years.

However, questions linger over China’s combat readiness amid a widening corruption purge within the Communist Party of China and People’s Liberation Army (PLA).

Observers have noted the smaller number of lawmakers in the 2026 NPC, which is in the fourth year of its five-year term. With 99 fewer deputies than in 2023, this is the sharpest decline over Mr Xi’s three terms in office. A further 113 deputies were also absent on the opening day, marking the lowest attendance since 2000.

As the military purge in China widens, even targeting top general Zhang Youxia in January, Mr Xi made it clear to armed services delegates that political loyalty remains the top priority.

“There must be no one in the military who harbours disloyalty to the party, and there must be no hiding place for corrupt elements,” Mr Xi said on March 7 as he called for budget management reforms and strict supervision over the exercise of power and quality control.

China will spend 1.94 trillion yuan (S$360 billion) on defence in 2026, a 6.9 per cent hike, as it seeks to achieve a military modernisation milestone by the PLA’s centenary in 2027.