For the first time in decades, China officially announced on Thursday that it is lowering its growth target. The goal is set at between 4.5% and 5% for 2026, a slight downward revision from the 5% pace recorded last year. It is the least ambitious target since 1991. The move gives the country more flexibility to tackle industrial overcapacity, manage geopolitical shocks and rebalance the economy.

Beijing announced the creation of more than 12 million new jobs and a targeted unemployment rate of 5.5%. The inflation target, measured by the consumer price index (CPI), is maintained at around 2%.

Set at 4% of GDP, the budget deficit is at a historically high level for China, which has typically kept it around the 3% threshold. Despite a degree of caution about not letting debt swell excessively, the government is accepting faster public spending to support activity. In parallel, Beijing plans to inject CNY 300bn ($43.5bn) into state-owned banks this year to finance major national projects and technological security, amid intense rivalry with the United States.

A five-year plan focused on technology

This plan sets the nation's strategy for the years ahead. It gives top priority to AI, robotics and semiconductors to reduce dependence on Washington. R&D spending is to increase by at least 7% a year, with a cumulative increase target of 40% over the full duration of the plan. For the digital economy, the aim is to raise its share to 12.5% of GDP (currently 10.5%).

A budget under strain

 China's defence budget, the world's second-largest but far behind that of the United States, will rise by 7% in 2026. That is a slight slowdown from last year's 7.2%, but it remains a significant increase in a tense geopolitical environment. The announcement also comes against the backdrop of an anti-corruption drive among senior ranks of the Chinese military.

On international trade, Li Qiang, China's premier, acknowledged a "grave and complex" global environment, marked by geopolitical risks and the fragility of free trade. China is therefore bracing for slower but more resilient growth, centred on technological self-reliance.

The shadow of demography hangs over the plan

With a population that is beginning to age rapidly and a shrinking workforce, China can no longer rely on an abundance of workers to drive GDP. By 2035, the number of Chinese people over 60 is expected to reach 400 million.

This shift towards "high technology" and robotics is therefore not only a political choice, but a vital necessity. Beijing must increase productivity per worker to offset their decline. The plan therefore aims to broaden automation to maintain the competitiveness of a nation that is ageing faster than it is getting richer.

Markets react positively

Chinese markets gave the plan a cautiously optimistic reception. The onshore CSI 300 index rose 1%, while in Hong Kong, the Hang Seng edged up 0.3%. Sector indices linked to artificial intelligence and semiconductors were among the day's strongest gainers.