China’s GDP Tops RMB 140 Trillion For The First Time, How Should 2026 Growth Be Set? Expert Expects Around 5%

On January 19, the National Bureau of Statistics released preliminary figures for China’s 2025 economic performance. Gross domestic product for the year was preliminarily estimated at RMB 140,187.9 billion, representing a 5.0% increase in real terms compared with the previous year.

This outcome aligned with market expectations. Examining the three principal demand drivers, retail sales grew by 3.7% in 2025, fixed‑asset investment contracted by 3.8%, and exports expanded by 6.1%. Exports thus bore significant pressure yet still achieved record levels, while domestic demand remained relatively weak.

“At the macro level, the economy advanced under pressure, shifted toward new and higher‑quality development, and delivered fresh results in high‑quality growth. If I were to summarize last year’s performance in four words, they would be stability, progress, innovation and resilience,” National Bureau of Statistics Director Kang Yi said at the January 19 press briefing.

As China moves into 2026, the economic landscape presents a complex mix of external and internal challenges. Externally, geopolitical tensions, protectionist barriers and disruptive technological change create uncertainty. Domestically, the imbalance of strong supply and weak demand persists, risks in key sectors remain, and issues related to consumption, employment and prices continue to require attention.

Against this backdrop of systemic global shifts and domestic structural transformation, questions arise about the appropriate growth target for 2026, the principal drivers of growth and the prospects for resolving structural imbalances. To explore these issues, Time Weekly recently interviewed Xu Hongcai, chairman of the Honglue Global Think Tank and deputy director of the Economic Policy Committee of the China Policy Science Research Association.

Xu expects the 2026 growth target to remain at about 5%. He notes that achieving roughly 5% growth over the past two years has created an element of policy and market inertia. While some international forecasts are slightly more conservative—around 4.8%—such projections have historically been revised upward during the year. More importantly, 2026 marks the opening year of the 15th Five‑Year Plan, a period when local authorities typically intensify implementation efforts and align annual plans with the new cycle. In that context, setting a target of “around 5%” serves to stabilize expectations, build consensus and guide policy action. Xu judges that actual growth in 2026 is likely to fall in a range of approximately 4.8% to 5.0%, with modest deviations on either side remaining within normal bounds. Given the combination of proactive fiscal measures, moderately accommodative monetary policy and accumulated industrial resilience and innovation capacity, he considers a target near 5% to be realistic and attainable.

Beyond headline GDP, Xu highlights three categories of indicators that merit close attention. Price measures are the first priority. Consumer price inflation returned to positive territory in October 2025, a notable development. Policymakers will continue to pursue moderately loose monetary conditions in 2026 with the objective of stabilizing inflation within a reasonable band; the GDP deflator, which captures prices across all goods and services, provides a more comprehensive gauge of macro price dynamics than CPI alone. The second category is employment. Employment trends have been affected by real‑estate adjustments, trade volatility, structural transformation and partial substitution of labor by automation and AI; the interplay among growth, employment and prices is tightly coupled, and stable growth is essential to sustain job creation and restore income expectations. The third category concerns external balances and financial stability, including capital flows and the exchange rate. With the Federal Reserve entering a rate‑cut cycle, the external environment may become more favorable; China’s ample reserves and available macro tools reduce immediate concerns in this area. Overall, Xu argues that macro policy should aim to generate a virtuous cycle linking growth, employment, price stability and financial steadiness rather than focusing narrowly on a single growth figure.

On the question of weak consumption, Xu attributes the shortfall not to unwillingness to spend but to inadequate income expectations, insufficient social protection and limited consumption scenarios. He identifies several under‑leveraged population segments. Low‑income households require stronger social safety nets and income support—particularly in rural areas—so that basic incomes rise incrementally and households feel confident to spend. Older cohorts around age 60 often have time and savings but lack access to high‑quality services. Expanding consumption venues such as night‑time economies, cultural and sporting events, and leisure activities would create more opportunities for scaled and collective consumption. At a deeper level, consumption depends on employment, income and expectations; if small and medium enterprises lack vitality and private‑sector confidence is weak, stimulus measures will have limited effectiveness.

Xu emphasizes that innovation constitutes the most sustainable source of growth. China has accumulated a solid foundation across multiple fields, and the next phase requires coordinated innovation led by industry‑chain anchors and major enterprises working with upstream and downstream partners, universities and research institutes to translate technological advances into productive capacity. While major strategic technologies still call for concentrated national efforts, the decisive factor is whether innovations can be applied at scale. Artificial intelligence, for example, offers vast application potential but must be integrated with traditional industry upgrades to generate broad economic impact. In agriculture, combining urban capital with rural resources to build modern agricultural organizations could open new growth avenues. In manufacturing, advanced production, digitalization and new industrialization remain clear priorities. Xu also underscores the often‑overlooked potential of the service sector: with material consumption approaching saturation, demand for higher‑quality cultural, entertainment, health, elderly‑care and sports services is substantial; services can both create employment and directly stimulate consumption.

Regarding the contribution of new productive forces, Xu estimates that they already account for nearly half of economic growth and still possess considerable upside. Regional clusters such as the Yangtze River Delta, the Guangdong‑Hong Kong‑Macao Greater Bay Area, the Beijing‑Tianjin‑Hebei region and the Chengdu‑Chongqing area demonstrate pronounced spillover effects. However, he reiterates that technology alone is not equivalent to productivity; application matters. Investments in chips, computing power and new infrastructure must be made accessible to small and medium enterprises and traditional industries to realize macroeconomic benefits. Some localities have built large computing centers, but the priority is to decentralize these capabilities so that smaller firms can leverage them for digital and intelligent upgrades.

On the persistent “strong supply, weak demand” imbalance, Xu views it as a medium‑ to long‑term structural issue rather than a transient phase. Overcapacity in certain sectors and insufficient effective demand are likely to persist for several years. Counter‑cyclical policies can provide temporary relief, but structural reform is required for a durable solution. He notes that the remaining reform tasks are the more difficult ones: ensuring genuinely fair competition and opening sectors to private capital where state enterprises still dominate will be challenging and time‑consuming. Fiscal reform is another critical area; longstanding mismatches between central and local responsibilities and resources have left local governments with heavy obligations and rising debt. Xu argues that the central government should assume greater responsibility for basic public services and social security to establish a more balanced institutional framework.