China NPC 2026: Two Sessions, GDP Target Cut & 15th Five-Year Plan Explained

Every year in early March, China holds what it calls the “Two Sessions” (Liang Hui) — the simultaneous annual meetings of its two most important political bodies in Beijing.

Body 1 — CPPCC (Chinese People’s Political Consultative Conference): A political advisory body that brings together representatives from China’s eight minor parties, ethnic minorities, professional groups, and overseas Chinese communities. The CPPCC can make policy suggestions but holds no legislative power. Its 2026 session opened on March 4.

Body 2 — NPC (National People’s Congress): China’s formal legislature with approximately 3,000 delegates from all provinces, autonomous regions, municipalities, and the military. Technically the highest organ of state power, though in practice all major decisions are made within the CCP before being ratified by the NPC — critics call it a “rubber stamp” body. The NPC formally announces economic targets, passes budgets, and signals policy direction. Its 2026 session opened on March 5.

Xi Jinping simultaneously holds three roles: General Secretary of the Chinese Communist Party (the most powerful position), President of the People’s Republic of China (head of state), and Chairman of the Central Military Commission (supreme military commander). Xi removed presidential term limits in 2018, cementing indefinite hold on power.

Li Qiang is China’s Premier — head of the State Council (the executive branch), equivalent to a Prime Minister. He manages day-to-day economic affairs. A close Xi ally and former Shanghai Party Secretary, Li Qiang took office in March 2023. He delivers the annual Government Work Report on the NPC’s opening day — China’s closest equivalent to a combined Budget Speech and Economic Survey.

The headline from the 2026 Government Work Report is a GDP growth target of 4.5–5% — the lowest China has ever formally set. This marks the first time Beijing has publicly stepped down from the “around 5%” target it maintained for three consecutive years (2023–2025).

The signals were already visible: 21 of China’s 31 provincial-level governments had pre-lowered their own 2026 growth targets. Guangdong — China’s largest provincial economy, whose GDP alone exceeds many G20 nations — set its own target at 4.5–5%, matching the national range.

Why is China slowing? Several structural forces are converging:

• Property Market Slump: Real estate once contributed ~25% of GDP. Since Evergrande’s collapse in 2021, property investment has not recovered
• Deflation: GDP deflator fell ~1% in 2025 — three consecutive years of deflation, signalling weak demand
• Weak Consumption: Household consumption is only ~40% of GDP, far below the 55–70% in developed economies
• Youth Unemployment: Exceeded 21% at its 2023 peak before China suspended monthly publication
• US Tech Restrictions: Cutting off access to advanced semiconductors and chip manufacturing equipment

The 2026 fiscal deficit target of 4% of GDP matches the 2025 level — itself a historic high. In normal years, China’s deficit ran at 2.5–3%. Even during COVID in 2020, it reached only 3.6%.

Sustaining a 4% deficit reflects Beijing’s continued use of government spending as an economic stabiliser. But the headline figure understates the true fiscal impulse — China relies heavily on off-budget instruments like ultra-long-term special treasury bonds and local government special purpose bonds that do not appear in the headline deficit number.

The most historically significant output of this NPC is the launch of China’s 15th Five-Year Plan, covering 2026–2030. China has run Five-Year Plans since 1953, modelled on Soviet planning. Since Deng Xiaoping’s reforms (1978), they have evolved from command-economy directives into strategic frameworks — but they remain the CCP’s authoritative blueprint.

Key priorities of the 15th FYP:

• Consumption-Led Growth: Raising household consumption from ~40% to 45% of GDP by 2030 — the central structural shift
• Technology Self-Reliance: Overcoming semiconductor bottlenecks, developing domestic AI (driven by DeepSeek’s success), localising industrial software
• Green Transition: EV supply chain expansion, renewable energy scaling, peak emissions before 2030, carbon neutrality before 2060
• Population Policy: Subsidies of ~$500/year per child under 3, addressing three consecutive years of population decline
• National Security: For the first time, explicitly linking economic development to security resilience and reducing Western tech dependence

This NPC unfolds against an unusually turbulent global backdrop. China has publicly condemned the US-Israel strikes on Iran — a calibrated stance, since Beijing is one of Tehran’s few remaining large-scale oil buyers with long-term energy interests in any post-war arrangement.

The more consequential event is the planned Trump-Xi summit on March 31, 2026 in Beijing — the most important bilateral meeting on the near-term horizon. Li Qiang’s Work Report described US-China economic ties as on “more stable footing” — signalling that Beijing is not seeking further escalation even while building strategic independence.

India Angle: China’s slowdown creates space for India in global manufacturing relocation — the “China+1” strategy multinationals are pursuing. But the 15th FYP’s tech self-reliance emphasis intensifies competition in electronics, EVs, solar, and industrial machinery. India’s GDP growth is projected at 7.6% for FY2026 (new base year). The India-China growth differential — 7.6% vs 4.5–5% — is the widest in decades. Whether India converts this into structural manufacturing capacity is the defining challenge of the next five years.