By setting a growth target of 4.5% to 5%, China is showing confidence based on its structural strengths.
A customer discovers drones at a shopping mall in Cangshan District, Fuzhou, Fujian, January 31, 2026.
This year’s Government Activity Report sets the economic growth target for 2026 at between 4.5% and 5%, after three consecutive years at “around 5%”. This orientation reflects a cautious assessment of a complex external environment, while sending a signal of pragmatism.
In recent years, the global recovery has lacked momentum, geopolitical conflicts have intensified, trade protectionism has gained ground, and global industrial and supply chains are rapidly restructuring. In this context, the Chinese economy maintains stable growth. In 2025, China’s GDP will exceed 140 trillion yuan, with annual growth of 5%, one of the fastest growing in the world. During the 14th Five-Year Plan period (2021-2025), China’s contribution to global growth remained around 30%.
The ability of the Chinese economy to remain stable and generate growth dynamics in such a complex international environment raises the question of the foundations of this resilience. The confidence needed to target a range of 4.5% to 5% is based on the country’s long-term structural strengths, the acceleration of innovation and the continued strengthening of institutional and political capacities.
Huge market: the foundation of resilient growth
To understand the Chinese economy, we must first grasp a fundamental fact: China has one of the largest markets in the world, with 1.4 billion inhabitants, more than 400 million of whom belong to the middle class. This demographic base generates colossal consumption potential, massive industrial needs and constantly expanding domestic demand.
Vast domestic demand acts as a driving force for continued development, supported by an expansion strategy that now places consumption at the heart of growth. By 2025, retail sales of consumer goods will exceed 50 trillion yuan. The expansion of online commerce, coupled with digital and service offerings, is opening up new growth avenues.
At the same time, China has the most complete industrial system in the world, with the added value of its manufacturing industry ranking first in the world for several consecutive years. This comprehensive industrial and supply chain not only improves operational efficiency, but also strengthens the resilience of the entire economic system. From traditional manufacturing to high-end equipment, from new energy vehicles to the photovoltaic sector, China has formed globally competitive industrial clusters. This comprehensiveness allows it to maintain a key position in the restructuring of international industrial chains and to provide major support for the stability of global industry.
The delivery service offered by a drone station in Shenzhen (Guangdong), February 19, 2026
New quality productive forces: the overhaul of growth engines
If the market scale constitutes the foundation of the Chinese economy, technological innovation and new quality productive forces become its driving force.
In recent years, China has sustainably increased its technological investments. The share of R&D expenditure in GDP is continually increasing, significantly strengthening capacities for fundamental research and original innovation. Breakthroughs are multiplying in artificial intelligence, biomedicine, quantum technologies and new energies, profoundly transforming the structure of the engines of economic growth.
Far from being limited to the rise of emerging industries, technological innovation is also accelerating the transformation of traditional sectors. The deep integration of digital and manufacturing makes smart manufacturing, the industrial Internet and digitalized supply chains major areas of upscaling. At the same time, the green transition is emerging as a new structuring trend: new energy vehicles, renewable energies and green production are developing rapidly, positioning China as a key global supplier of low-carbon technologies and products.
Behind these changes lies a paradigm shift: the logic of Chinese growth is fundamentally changing. Formerly dependent on the accumulation of production factors and quantitative expansion, it now favors qualitative improvement driven by innovation. This model supports the transition from growth driven by factors to growth driven by innovation. In the long term, new quality productive forces improve the strength of growth while providing the Chinese economy with more lasting dynamism.
Macroeconomic governance and institutional advantages
If the market and innovation fuel Chinese growth dynamics, institutional advantages and the solidity of macroeconomic policies guarantee its stability.
Faced with international trade tensions and financial market volatility, China has preserved its economic fundamentals through counter-cyclical and trans-cyclical macroeconomic regulation. The coordination of fiscal, monetary and industrial policies made it possible to effectively stabilize employment, support businesses and reassure the markets.
At the same time, the deepening of reform is continuously optimizing the business environment. The construction of a unified national market is accelerating, the market access regime is improving, and the conditions for private sector development are consolidating. Institutional opening is also progressing through pilot free trade zones and ports, whose high-level activity injects new vitality into the national economy.
In the context of profound changes in the global economy, China maintains its commitment to opening-up and actively participates in global economic cooperation and governance. A major player in global trade, it also contributes to shaping international cooperation rules and mechanisms. Through jointly building the Belt and Road Initiative, promoting regional cooperation and expanding market access, China brings more factors of stability to the global economy.
This year, the Government Activity Report specifies the implementation of a more proactive fiscal policy and a relatively flexible monetary policy, in particular through the increase in budgetary expenditure, the strengthening of financial support for priority sectors, the reduction in key rates and the required reserve rate, and the continued reduction in general financing costs. So many levers to offer more robust macroeconomic support for the stability of growth, employment and expectations.
Social well-being: the underlying engine of economic growth
The primary purpose of economic and social development is to respond to the population’s growing aspirations for a better life. Improving living conditions and consolidating the social protection system thus constitute lasting pillars of growth.
In steering its growth, China is paying increased attention to the inclusive and shared nature of its development. From stable employment to increased income, including improving education and health or strengthening services for seniors, social well-being occupies a central place in the national strategy. This people-centered approach not only embodies the values of modernization with Chinese characteristics, but also sets a clear direction for economic and social development.
In recent years, China has improved its social protection system: coverage of basic old-age and health insurance is continually expanding, while employment remains generally stable. Household incomes are increasing steadily, favoring the expansion of the middle class and the gradual release of consumption potential.
Strengthening public services – education, health, care for the elderly and early childhood – improves the quality of life while creating a social environment more conducive to long-term development. By constantly raising the level of these services, China combines economic growth, social justice and shared prosperity.
At the macroeconomic scale, improving well-being goes beyond the simple social objective to establish lasting stability of growth. Rising incomes and strengthening social protection stimulate consumption, unlock the potential of domestic demand and promote a development model driven by the latter. A society where employment is stable, incomes increasing and social protection robust offers the economy a solid foundation and more lasting endogenous dynamism.
Currently, the global economy remains exposed to multiple uncertainties, but the fundamentals of the Chinese economy remain strong. In the long term, China retains considerable development potential. With continued breakthroughs in innovation, industrial upgrading and deepening reform and opening-up, it is expected to maintain stable growth in a complex environment, while making greater contributions to global economic recovery.
*XU HAO is a special contributor to China Focus.
