Economist: GDP target likely 'around 5%'

China is likely to set an economic growth target of around 5 percent for 2026, a goal that requires more forceful measures to overcome the persistent constraint of insufficient domestic demand, a senior economist told China Daily.

"A sustained period of modest price levels for both goods and capital is exerting a drag on China's economic momentum, weakening producer and investor confidence and creating a self-reinforcing cycle of tepid demand," said Zhang Liqun, a researcher at the Development Research Center of the State Council, China's cabinet.

With the prevailing sentiment that "money is harder to earn", households and corporations are becoming more precautionary, tightening their purse strings, Zhang said in an exclusive interview with China Daily.

Achieving the economic growth target of around 5 percent under these conditions this year, Zhang noted, takes more than conventional stimulus; it demands targeted measures to directly break the cycle of weak confidence and stimulate demand.

The official GDP growth target for this year will be announced in the Government Work Report during the "two sessions", the annual meetings of China's top legislative and political advisory bodies, in March.

"The core objective is to resolve the constraint of inadequate demand and fully release the economy's inherent dynamism," Zhang said."The process of sustained demand release should, in theory, allow actual growth to approach our estimated potential growth level of around 8 percent."

The negative growth in fixed-asset investment has emerged as a critical manifestation of insufficient domestic demand, prompting calls for urgent policy action to reignite this crucial economic engine, according to Zhang.

China's fixed-asset investment fell 3.8 percent year-on-year to 48.5 trillion yuan ($6.9 trillion) in 2025, data from the National Bureau of Statistics showed.

Chinese policymakers have sent clear signals to stabilize and revive investment through strengthened policy support this year, including appropriately increasing the scale of central budget investment and continuing to leverage new policy-based financial instruments.

The tone was set at the annual Central Economic Work Conference held in December, which emphasized the need to "halt the decline in investment, promote recovery and effectively stimulate private investment vitality", amid a complex external environment and declining investment returns.

Over the past year, China has rolled out a series of targeted policies, including an 800-billion-yuan list of key projects to implement major national strategies and enhance security capacity in key areas, and 500 billion yuan in new policy-based financial tools to supplement project capital. These efforts aim to reinforce the role of government investment in driving social investment.

Going forward, China could turn to a substantial upgrade of public infrastructure and services financed by a new round of ultra-long-term special bonds, a move Zhang described as key to reversing the recent decline in overall investment.

"This targeted public investment is the pivotal lever for shifting total investment from contraction back to growth," Zhang said. "Once activated, it will generate substantial demand across various sectors such as manufacturing, energy, equipment and engineering."

"The country's water, road, energy, and telecommunications networks require substantial upgrading to meet future demands and support high-quality growth," Zhang said."When measured against the infrastructure levels of developed countries, the gap remains evident."

The National Development and Reform Commission, the country's top economic regulator, announced in October that China will build and upgrade more than 700,000 kilometers of underground pipelines during the 15th Five-Year Plan period (2026-30), a push expected to generate over 5 trillion yuan in new investment.

New orders would revitalize production and investment in upstream enterprises. This industrial revival, in turn, is expected to boost employment and accelerate growth in household incomes, ultimately aiming to strengthen consumer spending — the other critical component of domestic demand, Zhang added.

China set its deficit-to-GDP ratio for this year at around 4 percent in 2025, along with 1.3 trillion yuan of ultra-long special treasury bonds.