BEIJING – China on Thursday announced its lowest growth target in 35 years, as the world’s second-largest economy struggles with domestic challenges and growing uncertainty around the world.
Premier Li Qiang, China’s No. 2 bureaucrat, said in a “work report” held at Beijing’s Great Hall of the People during the opening of the National People’s Congress, China’s biggest political event of the year, that China will aim for gross domestic product (GDP) growth of 4.5% to 5% this year, “while actually aiming for improvement.”
This figure is the lowest compared to the 5% target achieved last year and is the first formal downgrade since 2023. This is an acknowledgment that the model that has fueled the economy for decades is beginning to reach its limits and that China’s growth is slowing.
“While we recognize our achievements, we are also clear-eyed about the difficulties and challenges we face,” Lee said in a speech that lasted more than an hour, during which he read much of the 35-page report.
Thousands of delegates gather in Beijing for the National People’s Congress, where the ruling Communist Party sets economic goals, develops policies and broadcasts its tone to the world. The event, overseen by Chinese leader Xi Jinping, is tightly scripted and almost entirely pre-determined to demonstrate leadership focused on stability.
The two leaders will seek to extend a fragile trade ceasefire, weeks before President Donald Trump visits China to meet with President Xi Jinping. The highly anticipated talks were further complicated by US and Israeli attacks on Iran, which has close ties to China.
China is trying to rebalance its export-dependent economy by expanding domestic demand while dealing with structural problems such as a long-term real estate slump, industrial overcapacity, and soaring local government debt.
It is also investing heavily in cutting-edge technologies such as artificial intelligence and robotics, competing with the United States for global dominance in these industries.
Li said the government will develop economic policies to “counter U.S. tariffs,” which have changed significantly since Trump returned to office last year and launched a trade war with China. Although China’s exports to the United States have plummeted due to tariffs, it sells more products to other parts of the world and posted a record trade surplus of about $1.2 trillion last year.
Defense spending is expected to rise 7% to more than $275 billion, down from 7.2% last year and about the same level as in recent years, according to a separate government budget report. China, which recently carried out a major purge of senior military officials, aims to modernize its military by 2035 amid rising tensions in the region, including the island of Taiwan, which Beijing claims.
“We will steadily advance military training and combat readiness, and accelerate the development of advanced combat capabilities,” Li said in his speech.
Despite widely expected growth targets being slightly lower, China is trying to project confidence in the face of uncertainty and pressure. But the situation is complicated by the war in Iran, China’s long-time strategic partner.
China is a lifeline for heavily sanctioned Iran, buying 80% of its oil imports in exchange for deep discounts. However, they account for only about 13% of China’s total oil imports and are easily replaced.
Beijing is more concerned about the Strait of Hormuz, a narrow shipping lane that Iran effectively closed in retaliation for U.S. and Israeli attacks. China, the world’s largest energy importer, relies on the Strait for a third of its oil imports and a quarter of its gas imports.
China has spent years building up its reserves, which analysts say could offset the immediate supply shock, but a prolonged conflict would threaten China’s economic interests across the region.
Iran becomes the second Chinese partner to be targeted by U.S. military action in the past two months, following the surprise detention of Venezuelan President Nicolas Maduro in January. Beijing has criticized the Iranian attack, as well as the US attack on Venezuela, but is unlikely to offer any support beyond rhetoric.
Stability amid international turmoil is a key theme for China’s leadership, which prefers a “multipolar world” to one dominated by the United States, but Beijing is also keen to maintain stability in its relationship with the United States, meaning an attack on Iran is unlikely to delay or derail President Trump’s trip to China, which the White House has said will begin on March 31.
In his speech, Li spoke of the “positive results” of the five rounds of U.S.-China trade talks and said economic and trade cooperation between the world’s two largest economies was on “a more stable footing.”
China’s economic plans are complicated by an aging and rapidly shrinking population, with authorities prioritizing more marriages and improving birth rates a decade after ending the country’s controversial one-child policy. The country of 1.4 billion people is facing a demographic crisis similar to that of the United States and many other countries, with young people increasingly postponing marriage and starting families or deciding not to have children.
Mr. Lee proposed building a “childbirth-friendly society” over the next five years, accompanied by reforms in education and medical care. Many young people in China complain that the cost of raising children is too high and that their chances of getting a job are too low.
China, where more than a fifth of its population is over 60, is also working to improve services for the other end of the age spectrum through efforts to strengthen its so-called silver economy. Lee said the government will expand sports programs and increase the number of beds in elderly care facilities.
