Other BriefingsChina’s Two Sessions 2026: Key Takeaways from the Government Work Report
The Two Sessions, or Lianghui, is the popular name for the back-to-back meetings of two of China’s major political bodies – the Chinese People’s Political Consultative Conference (CPPCC) and the National People’s Congress (NPC), China’s legislature. The Two Sessions are closely watched by foreign investors, as they provide a key insight into China’s political landscape, reveal Beijing’s priorities for the coming year, and outline the country’s overall policy direction.
On Thursday, March 5, 2026, the NPC convened for its opening meeting of the annual Two Sessions. In the meeting, Premier Li Qiang delivered the 2026 Government Work Report (2026 GWR) on behalf of the State Council, which sets a vast range of economic and development tasks for the country to pursue over the coming year. It includes the 2026 GDP growth target and outlines how China plans to achieve its economic goals.
In this article, we provide the key takeaways from the 2026 GWR as new details emerge throughout the Two Sessions.
2026 GDP target set at 4.5%-5%
In his 2026 GWR, Premier Li Qiang announced that China will target GDP growth of 4.5%-5% in 2026, adding that policymakers will “strive for better outcomes in actual implementation.”
This marks the third time China has adopted a growth range, following 2016 and 2019, rather than a single-point target.
While some may interpret the range as a loosening of ambition, we think the shift reflects a more calibrated, strategic approach to macroeconomic management. Several layers of meaning sit behind the choice of a range:
- Acknowledging rather than hiding uncertainty: With the US-China trade conflict ongoing and external demand highly uncertain, fixing on a single number risks sending negative signals if conditions deteriorate. A range preserves policy flexibility: The upper bound (5%) reflects ambition while the lower bound (4.5%) provides a realistic floor that policymakers believe can be defended.
- Signaling a shift from “speed” to “quality”: The phrasing “strive for better outcomes” is telling. It signals that the government is not abandoning higher growth, but will not distort policy, for example, through excessive local infrastructure spending or inflated data, just to hit a headline figure. Any outcome within the band is acceptable, emphasizing growth quality, sustainability, and efficiency over pure expansion.
- Coordinating with the upcoming 15th Five-Year Plan: Most research institutions estimate China’s potential growth rate for the 15th Five-Year Plan period (2026–2030) at 4.5–5 percent. Setting a range now aligns the 2026 target with the closing year of the 14th Five-Year Plan and the opening trajectory of the 15th Five-Year Plan, while also supporting long-term goals such as the 2035 development vision.
Where is the actual growth rate likely to land?
We think A reasonable expectation is that actual growth will fall toward the lower half of the range, around 4.7-4.8 percent. The key drivers behind this expectation include:
- Tariffs and trade pressures are significant: Net exports that contributed around 30 percent of GDP growth in 2025 are expected to weaken substantially.
- Domestic demand will improve but not fully offset external drag: Consumption and real estate may recover modestly on policy support, but the rebound is unlikely to be strong enough to counterbalance weaker exports.
- Wording in the 2026 GWR gives political cover for outcomes near 4.5 percent: The phrase “strive for better results” signals that 4.5 percent is a fully legitimate outcome, not a fallback scenario.
What this means for businesses
For companies operating in or with China, the growth range communicates several practical signals:
- No return to growth-at-all-costs stimulus: Firms should not expect large-scale infrastructure spending or aggressive credit expansion simply to boost GDP. The policy direction remains “high-quality growth,” not “speed-first growth.”
- Export-oriented industries face real pressure: Companies highly dependent on foreign demand should accelerate diversification into emerging markets, and/or expansion into domestic demand segments.
Other key economic targets for 2026
China’s 2026 Government Work Report sets out a broader package of macroeconomic targets alongside the GDP growth range, outlining priorities in prices, income, trade balance, food security, and emissions.
Consumer inflation at Around 2%
Achieving around two percent CPI growth in 2026 will be challenging. In 2025, price growth was close to zero amid persistently weak domestic demand. Although the inflation target at “around 2%” is the lowest in over two decades, it is more a ceiling than a forecast for 2026.
Moving from roughly 0.2 percent inflation to two percent requires nearly 1.8 percentage points of recovery in consumer prices. Against the backdrop of still‑soft consumption and long‑running deflationary pressures in the producer price index, the gap is significant. This target implies that monetary policy will likely maintain a supportive, moderately accommodative stance until a clearer price recovery takes hold.
Household income growth in step with economic growth
The logic behind aligning income growth with GDP growth is straightforward:
China’s most acute macroeconomic constraint is insufficient domestic demand, and one of the structural roots is weak household income expectations.
By emphasizing job creation and ensuring that income rises broadly in line with output, policymakers aim to strengthen the chain:
Stable income → Stronger consumption → Sustained domestic demand
This framing aligns with official priorities to boost internal demand and address supply-demand imbalances.
Basic equilibrium in the balance of payments
The target of maintaining a “basic equilibrium” in the balance of payments is a constraint, not a push for large surpluses.
“Basic equilibrium” means policymakers seek to avoid:
- An excessively large current account surplus (which could provoke trade frictions or unwanted RMB appreciation); and
- Disorderly capital outflows or sharp declines in foreign exchange reserves.
In 2025, China already achieved a basic equilibrium with record trade volumes and reserves above US$3.2 trillion. In 2026, although exports may soften under trade‑war pressures, the broader balance is still expected to remain stable under existing capital controls. From a business perspective, this signals that the exchange rate policy will not deliberately engineer major depreciation, and the RMB is likely to remain generally stable.
Grain output: Around 1.4 trillion jin
The grain‑output target of around 1.4 trillion jin (about 700 million tonnes) continues to represent a food‑security baseline, broadly consistent with recent actual production levels. The use of “around” reflects a defensive, stability‑oriented target, not an aggressive push for expansion.
The backdrop includes renewed geopolitical uncertainty, continued sensitivity around food self‑reliance, and the strategic objective of ensuring that “China’s rice bowl is firmly in China’s hands.” Agricultural enterprises can expect ongoing policy support, subsidies, and investment targeted at grain production.
CO₂ emissions per unit of GDP: Down about 3.8%
The goal of reducing CO₂ intensity by around 3.8 percent is moderately ambitious but broadly in line with recent annual reductions during the 14th Five‑Year Plan. As 2026 marks the start of the 15th Five‑Year Plan, targets are typically set conservatively in opening years to allow for multi‑year calibration.
Key drivers include:
- Continued energy‑mix adjustment (higher share of renewables);
- Tighter capacity controls in high‑energy‑consuming sectors; and
- Incremental improvements in energy efficiency.
For businesses, this signals that carbon and energy constraints will continue to tighten, especially for steel, aluminum, cement, and other high‑emission industries. At the same time, investment in green technologies, renewable equipment, and efficiency upgrades will continue to receive policy tailwinds.
China’s macroeconomic policy orientation for 2026
Premier Li also announced China’s macroeconomic policy for 2026 in the GWR. China’s macro policy stance for 2026 revolves around two core ideas: stability with progress and integrating stock and incremental policy tools. The GWR places counter‑cyclical and cross‑cyclical policy aims side by side, highlighting the need to stabilize short‑term growth while also preparing the ground for medium‑term structural transition. This signals that the government is not resorting to short-burst stimulus but instead designing a policy mix that supports the present and reshapes the future. The emphasis on “integrated effects” also suggests stronger coordination across fiscal, monetary, industrial, and regulatory tools compared to previous years.
Fiscal policy: Expansionary, but with a shift in priorities
Fiscal policy in 2026 will be the most expansionary in years, even if the headline deficit ratio simply “stays” at 4 percent.
For decades, China kept its fiscal deficit ratio below the widely observed 3‑percent threshold. During the pandemic in 2020, the ratio was lifted to 3.6 percent, adjusted again to 3.8 percent in 2023, and then set at 4 percent in 2025. In 2026, the government has chosen to maintain the deficit ratio at 4 percent, with the absolute deficit expanding to RMB 5.89 trillion, a historically high level that demonstrates the continued reliance on proactive fiscal policy to support growth and stabilize demand.
Once broader instruments are included, namely ultra‑long special treasury bonds, local special bonds, and special sovereign bonds to replenish bank capital, the effective size of fiscal expansion reaches nearly RMB 12 trillion, far exceeding what the official deficit figure conveys.
Each type of bond plays a specific role:
- Ultra‑long special treasury bonds (RMB 1.3 trillion) will continue to support national strategic capabilities, equipment upgrades, and consumer goods replacement, benefiting sectors like industrial machinery, home appliances, and new‑energy vehicles.
- Local government special bonds (RMB 4.4 trillion) will tighten project controls, accelerate self‑approved issuance pilots, and allow bond proceeds to be used to swap implicit debt and clear overdue government payments to suppliers. This offers real relief to private companies engaged in government procurement, even though it reduces the share of funds available for new investment.
- Special sovereign bonds (RMB 300 billion) will replenish bank capital to maintain credit supply at a time when net interest margins are thinning, and non‑performing loan pressures are rising.
Most importantly, the structure of fiscal spending is shifting. The government is explicitly prioritizing boosting consumption and “investing in people”, including education, healthcare, and social safety nets, rather than directing most spending into traditional infrastructure. This marks a substantive shift in fiscal thinking: using government spending to directly strengthen household income expectations and spending power. Meanwhile, the call for governments to “live within tighter budgets” is not contradictory: it means administrative spending will be cut sharply to free up resources for development and social needs.
Monetary policy: A rare shift toward “appropriate easing”
Monetary policy adopts the phrase “appropriately accommodative”, a term used only during the 2008 financial crisis and re‑introduced in late 2025. Its reappearance is a strong sign that rate cuts and reserve‑requirement‑ratio reductions are likely, rather than conditional.
The central bank now explicitly includes “a reasonable recovery in prices” as a policy target, aligning closely with the GWR’s 2 percent CPI goal. With inflation having hovered around zero for an extended period, monetary policy is expected to play an active role in nudging prices upward and preventing deflationary expectations from becoming entrenched. This gives the PBOC considerable room to maintain an accommodative stance without worrying about inflation spiraling out of control.
The GWR also emphasizes that “growth in total social financing and M2 should be aligned with the targets for economic growth and prices”, a technical but important signal. If real GDP is expected to grow around 5 percent and CPI around 2 percent, the implied nominal GDP growth of roughly 7 percent suggests that money supply expansion should be anchored at a similar level. As a result, M2 growth in 2026 is likely to fall in the 7–8 percent range, indicating a broadly liquid environment conducive to supporting demand, easing financing conditions, and stabilizing expectations.
Beyond broad easing, structural tools will expand to support three areas: domestic demand, technological innovation, and small businesses. New mechanisms allowing firms to use data assets and intellectual property as collateral reflect the government’s effort to fix long‑standing financing challenges for light‑asset tech firms, though legal and valuation frameworks still need to catch up. On the exchange‑rate front, policymakers aim to keep the renminbi basically stable, avoiding depreciation as a tool to offset trade pressures.
Policy coordination: Reducing internal friction
A major institutional upgrade for 2026 is the introduction of policy consistency assessments, designed to reduce contradictions across different policy areas. In the past, macro stimulus could be weakened by unexpected regulatory tightening in certain sectors, or by conflicting objectives across ministries. Under this new mechanism, even non‑economic policies, such as environmental regulation, education reforms, or data‑security rules, must be evaluated for their broader economic impact before implementation.
For businesses, this should reduce policy unpredictability and help stabilize expectations, something the government itself acknowledges is essential at a time when confidence among firms and households remains fragile.
Putting it all together, China’s 2026 policy package follows a clear and coordinated logic:
- Fiscal policy will take the lead in boosting demand.
- Monetary policy will lower financing costs and support price recovery.
- Reforms will address structural bottlenecks and clear arrears.
- Policy coordination will reduce uncertainty and strengthen confidence.
The level of integration across these policy tools is higher than in recent years, reflecting a deliberate effort to support growth while continuing structural adjustment. For companies, the macro environment will be generally supportive, but the benefits will not be evenly distributed. Firms engaged in technology innovation, consumption upgrading, and green transition will find themselves closely aligned with policy priorities, whereas traditional infrastructure suppliers and old‑model export manufacturers will continue to face pressure to adapt.
Foreign investment policies in 2026
The GWR outlines a broadly consistent approach to foreign investment in 2026, emphasizing high‑level opening‑up, institutional alignment with global norms, and a continued focus on creating conditions conducive to long‑term cooperation. Premier Li Qiang reaffirmed that China will expand opening in a steady and orderly manner, promote win‑win cooperation, and use further openness to drive reform and development. This year’s agenda places particular weight on institutional opening‑up, services‑sector liberalization, and participation in international rulemaking.
A key priority is the expanded unilateral opening of China’s market, especially in services. Market access will continue to widen in areas such as value-added telecommunications, biotechnology, and wholly foreign‑owned hospitals, alongside cautious expansion of openness in the digital economy. The negative list for cross‑border services trade will be reduced further, and the national demonstration zones for service‑sector opening will be strengthened. China also aims to deepen its integration into global economic frameworks by advancing negotiations on more regional and bilateral agreements and accelerating efforts to join the Digital Economy Partnership Agreement (DEPA) and the Comprehensive and Progressive Agreement for Trans‑Pacific Partnership (CPTPP). These moves, along with active participation in WTO reform and ongoing development of free‑trade zones and the Hainan Free Trade Port, signal China’s intention to remain deeply embedded in global economic governance.
China will also expand two‑way investment cooperation and continue to refine mechanisms to promote and protect foreign investment. This includes safeguarding national treatment for foreign companies, implementing the updated Catalogue of Encouraged Foreign Investment, and supporting foreign enterprises’ reinvestment and local production expansion. Strengthened service guarantees for foreign firms, alongside improving the quality of development zones and industrial parks, aim to reinforce China’s position as an investment destination. At the same time, China is working to guide supply‑chain layout in a more orderly manner across borders, enhance overseas service networks for Chinese firms, and improve risk‑prevention mechanisms for outbound investment.
It is important to note that these measures, while comprehensive, are broad extensions of policy-directions pursued in recent years, rather than radical new departures. This may reflect a sober judgment: the core challenges facing foreign investment today lie less in China’s domestic policy environment and more in global supply‑chain reconfiguration and geopolitical tensions. In other words, policy may not be the binding constraint; expectations are. Foreign companies should therefore approach China’s policy environment with a realistic, business‑driven framework. Support in areas such as healthcare, biotechnology, advanced manufacturing, and green technologies is genuine and actionable, but foreign firms must proactively engage to benefit from it.
China may no longer serve as the sole global production base for many multinational firms, but it remains a critical node in global strategies, particularly for companies willing to adjust their footprint and deepen their integration into China’s industrial and innovation ecosystems. For foreign investors, the key question is not “stay or leave,” but how to recalibrate the role of China within a diversified global portfolio.
Key targets of the 15th Five‑Year Plan (2026-2030)
In presenting the GWR, Premier Li Qiang noted that the State Council has prepared the Outline of the People’s Republic of China’s 15th Five‑Year Plan for National Economic and Social Development (Draft) and submitted it to the session for review. This marks the formal entry of the 15th Five‑Year Plan into the national legislative process and sets the foundation for China’s economic and social development direction over the next five years. Below we list the key targets.
Key achievements during the 14th Five-Year Plan period
- GDP growth: China’s GDP crossed multiple thresholds, RMB 110 trillion, RMB 120 trillion, RMB 130 trillion, and RMB 140 trillion, achieving an average annual growth rate of 5.4%, well above the global average.
- Innovation & R&D: Nationwide R&D spending grew by an average of 10% per year, and high‑value invention patents reached 16 per 10,000 people.
- Manufacturing strength: China’s manufacturing sector has led the world in value added for 16 consecutive years, with industrial and supply chains becoming more resilient and secure.
- Opening‑up: All access restrictions on foreign investment in manufacturing were lifted.
- Trade competitiveness: China strengthened its position as the world’s largest trader of goods.
- Household income & employment: Per capita disposable income rose at an average annual rate of 5.4%, and more than 60 million new urban jobs were created.
- Education & health: Average years of schooling for the working‑age population increased to 11.3 years, and life expectancy reached 79.25 years.
- Environment & air quality: In prefecture‑level cities and above, the share of days with good or excellent air quality rose to 89.3%.
- Forest resources: With forest coverage surpassing 25%, China achieved the world’s fastest and largest increase in forest resources.
- Renewable energy: China built the world’s largest and fastest‑growing renewable energy system.
- Urbanization: China’s permanent‑resident urbanization rate reached 67.9%.
1. GDP Growth: “Remain within a reasonable range; annual targets to be set as needed”
This is a major structural shift. For the first time, a Five‑Year Plan does not lock in a specific GDP growth number, instead delegating the final target to the annual GWR.
Although the plan deliberately avoids stating “how much,” it provides a clear implicit anchor: China aims to double its 2020 per‑capita GDP by 2035. Starting from roughly US$10,500 in 2020, reaching US$21,000 by 2035 requires an average annual growth rate of about 4.6 percent. This implies that if GDP growth during 2026-2030 averages around 4.5 percent, and China remains on track. This also aligns closely with the 2026 target of 4.5%-5% and with most external estimates of China’s medium‑term potential growth.
In essence, China is institutionalizing uncertainty, acknowledging the unpredictability of trade tensions, geopolitics, and demographic shifts, and avoiding the risks of setting a rigid number.
2. R&D investment: Annual growth of over 7%
This is both an ambitious and pressure‑inducing target.
Although the growth rate mirrors that of the 14FYP, the baseline is now much larger (R&D investment exceeded RMB 3.92 trillion in 2025). Maintaining 7%+ annual growth over five years implies a massive cumulative increase.
The logic is clear: intensifying US-China tech decoupling requires China to outpace GDP growth in R&D spending to reduce reliance on foreign technologies in chips, AI, biotech, and other “chokepoint” areas.
For businesses, this may indicate continued and possibly expanded R&D tax incentives and strong national funding flows toward hard‑tech sectors.
3. Green and Low‑carbon transition: Carbon Intensity down 17% over five years
A cumulative 17 percent reduction in CO₂ emissions per unit of GDP translates into roughly 3.7%-3.8% per year, which is fully aligned with the 2026 annual target.
The consistency signals deliberate pacing: no front‑loading, no last‑minute sprint.
This target serves as a direct mid‑term milestone toward China’s 2030 carbon‑peaking commitment. This target is challenging, but realistic. Key drivers would include renewable energy expansion, electric‑vehicle penetration, and stricter capacity controls in steel, cement, and other high‑emission sectors.
4. Digital economy: Core digital industries to reach 12.5% of GDP
With the current share at around 10 percent, raising it by 2-2.5 percentage points in five years requires these industries (cloud computing, AI, semiconductors, software, data services) to grow significantly faster than overall GDP.
This is one of the most concrete expressions of the “new quality productive forces” agenda and will be a major focus of investment and industrial policy.
5. Education quality: Average Years of schooling to reach 11.7 years
This requires an increase from 11.3 years in 2025, driven by broader access to high school and higher education and expansion of vocational training.
For companies, it implies ongoing improvements in workforce quality, but also rising labor‑cost pressure in low-end manufacturing.
6. Life expectancy: Increase to 80 years
Raising life expectancy from 79.25 years in 2025 to 80 over five years is a steady but increasingly challenging task, given aging demographics and the burden of chronic disease.
This target will accelerate initiatives in:
- healthcare capacity expansion
- elderly‑care services
- public‑health infrastructure
- preventive health industries
7. Elder‑care capacity: Nursing‑Care beds to reach 73% of total elderly‑care beds
Current nursing‑care beds account for around 60%, meaning the share must rise significantly. This responds directly to demographic pressure, considering China now has more than 200 million people aged 65+.
The shift requires large‑scale upgrades of existing facilities and benefits segments such as elder‑care real estate, medical‑nursing integrated institutions, and professional care‑worker training.
8. Grain production capacity: Around 1.45 trillion Jin
This is slightly above the 2026 annual target of 1.4 trillion jin, implying a 3–4% increase over the period. The gains may come primarily from:
- better seeds
- precision agriculture
- high‑standard farmland
This is a national security bottom‑line target with high policy rigidity.
9. Comprehensive energy production capacity: 5.8 billion tons of standard coal
This represents an increase from around 4.8–5.0 billion, a 16-20 percent increase. Growth will mainly come from renewables (wind, solar, hydro, nuclear), with coal providing only marginal support as a stabilizer.
This target sits in tension with the carbon‑reduction goal, which means the energy mix must shift faster than total output rises, a demanding challenge for the energy sector.
10. Risk management: Orderly resolution of local government debt, real estate risks, and small financial institution risks
There are no numerical targets, but inclusion in the Plan indicates these three risks are core policy priorities for the entire period. The keyword is “orderly”, which indicates the aim is to control pace and prevent systemic instability, rather than to force rapid deleveraging.
For investors, this implies ongoing policy backstops, no “infinite support” for high‑risk entities, and multi‑year, steady risk digestion rather than abrupt corrections
Overall, the 15FYP targets reflect two defining features:
Key takeaway: Navigating 2026 and the Early 15th Five‑Year Plan
China is entering a phase where policy priorities are shifting from headline growth to structural resilience, technological upgrading, and long‑term security. Fiscal and monetary policy will remain supportive, but in more targeted and coordinated ways. Institutional opening‑up will continue, yet foreign investors must adapt to a more complex global environment in which localization, policy engagement, and supply‑chain diversification matter more than ever.
For businesses, domestic and foreign alike, opportunities remain substantial in sectors aligned with national priorities: advanced manufacturing, digital infrastructure, green technologies, healthcare, and the silver economy. At the same time, traditional models built on low‑cost labor, heavy investment, or reliance on a single export market will face persistent pressure to upgrade or reposition.
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