China's largest annual political event, the "Two Sessions" (Lianghui) — comprising the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC) — will open on March 4, starting with the CPPCC. Amid mounting challenges including tariff conflicts with the United States and sluggish domestic demand, attention is focused on the economic blueprint for the first year of the 15th Five-Year Plan (2026-2030). Whether President Xi Jinping will accelerate efforts to consolidate power ahead of next year's 21st National Congress of the Communist Party, which will determine his fourth term, is also being closely watched.
GDP Growth Target Likely to Drop Below 5%
The highlight of the Two Sessions will be Premier Li Qiang's Government Work Report at the NPC opening session on March 5. Li will review the previous year's work and present this year's macroeconomic policy targets, including GDP growth rate, fiscal deficit ratio, and Consumer Price Index (CPI), along with detailed implementation plans.
This year's GDP growth target is widely expected to be set at a historic low of 4.5% to 5%. China has maintained a target of "around 5%" for the past three years, achieving actual growth rates of 5.2%, 5.0%, and 5.0% respectively. However, with growth falling to the 4% range since the third quarter of last year amid U.S. trade pressure and prolonged domestic demand weakness, authorities are expected to lower expectations. At provincial-level Two Sessions held from last month through mid-February, 21 of 31 provincial governments lowered their growth targets, lending credence to this forecast.
The fiscal deficit-to-GDP ratio is expected to remain at last year's level of 4%. Authorities are likely to focus on maintaining fiscal discipline through targeted support for priority policy areas rather than broad stimulus measures. Local government special bond issuance, which is not included in the official fiscal deficit ratio, is expected to match or slightly exceed last year's 4.4 trillion yuan.
The CPI target is also expected to remain at 2%. Despite lowering the target from 3% to 2% last year for the first time in 21 years amid prolonged weak domestic demand, actual inflation was virtually zero. With inflation hovering around 0% for three consecutive years since 2023 and deflation fears mounting, analysts believe authorities will likely maintain the target for market stability despite the gap with reality. Bloomberg noted that "China generally views the annual CPI target as a ceiling rather than a binding target."
Household Consumption Target of 47%; R&D Budget to Exceed 400 Billion Yuan
China plans to concentrate budget allocations on domestic demand stimulus and science and technology under a "selective focus" approach. At the Fourth Plenum of the 20th Central Committee last October, authorities passed the 15th Five-Year Plan, designating consumption and investment stimulus alongside "new quality productive forces" — new qualitative growth driven by advanced technology innovation — as key priorities.
Domestic demand stimulus will likely emphasize consumption, particularly services consumption. With quantitative growth reaching its limits, the consensus view is that further growth potential is constrained without boosting consumption. China's household consumption as a share of GDP stands at approximately 40%, significantly below the OECD average of 60%. Subsidies under the "trade-in" program, previously applied to durable goods such as automobiles and mobile phones, are expected to expand to services including entertainment, sports, and domestic help. Policy support is also likely for new consumption areas such as AI-based services and the low-altitude economy. Given declining birth rates and aging demographics, measures to promote the "silver economy" including elderly care and community childcare, as well as strengthened social security systems to boost consumption propensity, are expected.
China has designated "clear improvement in household consumption rate" as a key development goal in the 15th Five-Year Plan — the first time this has been specified as a top-tier objective. Accordingly, observers anticipate this year's Two Sessions may present a specific target to raise the household consumption share of GDP from the current 40% to approximately 47%. Liang Zhonghua, an analyst at Guotai Junan Securities, projected that "depending on policy intensity, China's household consumption rate could rise to between 42% and 47% by 2030, boosting GDP growth by 2.9 to 3.9 percentage points."
Large-scale support for science and technology is also expected to continue. Authorities will accelerate self-reliance in core technologies such as semiconductors and industrial software, while advancing the "AI+" action plan presented at last year's Two Sessions to expand artificial intelligence across all industrial sectors. Specific support measures for quantum science and technology, bio-manufacturing, hydrogen energy, and fusion energy — designated as new growth drivers at the Fourth Plenum — warrant attention. The R&D budget for science and technology is expected to reach a record high. Last year's allocation was 398.119 billion yuan, and considering the annual increases of 7-10%, exceeding 400 billion yuan this year appears certain.
Xi Consolidates Power Ahead of Fourth Term; Messages to U.S. and Japan in Focus
This Two Sessions is also expected to serve as an opportunity for President Xi to consolidate power ahead of his fourth term, which will be confirmed next fall. Follow-up measures regarding former Central Military Commission Vice Chairman Zhang Youxia and former Central Military Commission member Liu Zhenli, who were ousted last month, are expected. The NPC Standing Committee has placed a motion to review the qualifications of individual representatives on the agenda for its February 25-26 meeting, just before the Two Sessions. Since NPC representatives have constitutional immunity from criminal prosecution, stripping their representative status is effectively the final step before criminal punishment.
According to the "CSIS China Military Purge Database" released on February 24 by the Center for Strategic and International Studies (CSIS), a U.S. think tank, at least 101 Chinese military generals and lieutenant generals have been purged or disappeared from official appearances since 2022, suggesting possible purges.
The "National Development Planning Law," likely to be passed at this Two Sessions, is also seen as a precursor to Xi's fourth term. This law governs the content, formulation, implementation, and supervision of five-year plans and related sectoral and regional plans. The Asia Society noted that "since China already has a mature planning system, this law is part of an ongoing political campaign to formalize and institutionalize the power structure centered on President Xi, rather than introducing new policy instruments."
External messaging ahead of U.S. President Donald Trump's visit to China next month is another key observation point. With Trump's key weapon — tariffs — having suffered a major blow from a recent U.S. Supreme Court ruling, the message toward the U.S. at this Two Sessions is drawing particular attention. A calibrated message emphasizing "mutual respect" and "conflict avoidance" while clearly defending core interests is expected. On Taiwan, a clearer position is likely, given Xi's recent stern warning to Trump during a phone call that "the United States should exercise extreme caution regarding arms sales to Taiwan." Whether warning messages will be directed at Japan, with which relations have rapidly deteriorated following Japanese Prime Minister Sanae Takaichi's remarks about "intervention in a Taiwan contingency," and whether Korean Peninsula issues, which were not separately mentioned last year, will be raised, are also matters of interest.