China is preparing to set a Gross Domestic Product (GDP) growth target of 5% for 2026, maintaining the same figure used for the current year, according to insights from government advisers and analysts. This target places significant pressure on policymakers to sustain robust fiscal spending and monetary easing measures as they endeavor to overcome a persistent deflationary cycle.
The objective is currently being formulated in private discussions and is directly linked to the commencement of the 15th five-year plan, a period intended to recalibrate the nation's economic trajectory following years of strain across various sectors.
The 5% growth target is designed to provide a strong launch for the new five-year plan, while officials work to mitigate the lingering effects of a prolonged property slump, subdued consumer demand, excess industrial capacity, and declining infrastructure investment.
Government leaders have already indicated a strategic pivot towards bolstering household consumption and driving structural economic reforms over the next five years. However, advisers suggest that these initiatives require time to yield results. Consequently, the immediate focus remains on government expenditure and actions by the central bank.
Beijing Leverages Fiscal and Monetary Tools
A majority of the advisers consulted indicated their support for a 5% growth target for 2026. A smaller contingent proposed a slightly lower range, between 4.5% and 5%.
Senior officials are anticipated to finalize and approve the definitive target during the Central Economic Work Conference scheduled for later this month. This conference is where the economic priorities for the upcoming year will be established. The public will be officially informed of the target in March, coinciding with the annual parliamentary meeting.
It is important to note that these advisers are not formal decision-makers, and their anonymity was requested due to the confidential nature of the discussions. Their perspectives align closely with the broader consensus among private economists. The agenda-setting meeting for the previous year took place from December 11 to December 12.
One adviser stated, "We should set a target of around 5% for 2026, the first year of the 15th five-year plan. There will be certainly challenges in achieving this, but there is room to maneuver with both fiscal and monetary policy."
Most of these advisers also advocate for the budget deficit ratio to remain around 4% or slightly higher. China has already established a record 4% of GDP deficit this year to support economic growth. In the oil sector, demand is not expected to provide any significant near-term boost.
Janet Kong, chief executive officer of Hengli Petrochemical International Pte, commented that oil demand is likely to remain weak until at least the middle of next year. "It’s difficult to find a very bright spot unless the government rolls out new policy at beginning of next year," Janet remarked on the sidelines of the Financial Times Commodities Asia Summit in Singapore.
China continues to be the world's largest importer of crude oil. However, sluggish economic growth, trade disputes initiated by President Donald Trump, and the increasing adoption of electric vehicles are constraining fuel consumption. Even the petrochemical sector, long considered a resilient area of demand, is experiencing pressure due to overcapacity.
Janet also highlighted a potential shift in global demand, suggesting that oil demand might strengthen more significantly in markets West of Suez compared to East of Suez, with the United States and traditional OECD economies anticipated to see growth.
Central Bank Support and Subsidies Remain Key Policies
Regarding policy measures, analysts at Citi anticipate that China's central bank will resume interest rate cuts as early as January 2026, following its last reduction in May. The period after the Central Economic Work Conference is also viewed as a crucial window for implementing another round of incremental property support measures.
On the fiscal front, Citi noted in a report that government bond issuance could once again be front-loaded in 2026, accompanied by a gradual shift in focus towards consumer support and welfare spending.
The government is also expected to continue its consumer goods trade-in subsidies into the next year. These subsidies amounted to 300 billion yuan, approximately $42.43 billion, this year. Officials are reportedly discussing the possibility of reallocating some funds from goods to services, but the overall support program is expected to remain active in 2026.
Looking further ahead, China faces a significant demographic and economic challenge. An official study related to the five-year plan proposals indicates that the country requires an average annual growth rate of 4.17% over the next decade to achieve a doubling of per capita GDP to $20,000 from its 2020 level. This milestone would signify China's formal transition into what officials term a moderately developed country.
Due to the current economic slowdown, policymakers are expected to maintain ambitious annual growth targets for the coming years. This strategy aims to preserve policy flexibility for future adjustments, according to advisers and economists.
Concurrently, the new five-year plan, which will be unveiled at the parliamentary meeting, is not anticipated to establish a fixed growth target for the entire period from 2026 to 2030. This approach mirrors the practice adopted for the current five-year plan.