Economic contraction or structural adjustment? How to scientifically understand China's development target

Editor's note: Zhu Fangfei is deputy director of the Institute for Public Policy of Zhejiang Province, and director of the Research Department of the Institute for Public Policy of Zhejiang University. The article reflects the author's opinions and not necessarily the views of CGTN.

At a critical juncture marked by global economic turbulence and a shift in growth drivers, China has once again come under the international spotlight. 

On March 5 this year, the Report on the Work of the Government proposed that the main targets for development in 2026 include GDP growth of 4.5-5%, while striving for better in practice. The release of this target sends a clear message to the world: China's economy is steadily transitioning from an era of high-speed growth to one of high-quality development. The adjustment in numerical targets is not merely a subtraction in figures, but an addition in structure and a multiplication of new growth drivers.

The strategic adjustment of development targets marks a shift from a "yardstick”to a "compass".

For a long time, GDP growth targets have been regarded as a key yardstick of China's economic performance. Today, however, they have evolved into a guiding framework for high-quality development.

Firstly, the growth range of 4.5–5% reflects a more resilient and inclusive approach to growth. It helps safeguard the bottom line of stable employment while leaving sufficient policy space for fostering new quality productive forces, mitigating real estate risks, and advancing the green transition, thereby avoiding the constraints of an excessive focus on growth rates alone.

Secondly, a moderate yet steady target provides essential room for structural reforms. It sends a strong signal that China is no longer willing to rely on excessive leverage or inefficient investment to pursue short-term prosperity. Instead, the country is proactively "slowing down" to achieve long-term improvements in quality. This emphasis on quality over quantity underscores a fundamental shift in focus from expanding in scale to optimizing the economic structure and enhancing development quality.

The setting of the development target is based on a comprehensive assessment of objective realities, economic laws, and long-term strategic alignment.

Firstly, as China's economy has transitioned from a phase of rapid growth to one of high-quality development, a moderate adjustment in growth expectations is both inevitable and necessary. It creates greater room for advancing deep structural reforms, improving incremental output, and revitalizing existing resources. Meanwhile, with growing external uncertainties, the target range appears more flexible and better suited to hedge against unforeseen risks and challenges.

Secondly, the 4.5–5% target for 2026 broadly aligns with China's potential growth rate and the underlying economic fundamentals. The World Bank estimates that China's potential growth rate for 2020–2030 is around 4.5%. This rate represents the maximum sustainable growth achievable under efficient resource allocation, steady technological progress, and an optimized institutional environment. From an international perspective, China will remain a major engine of global growth among leading economies in 2026. 

According to the IMF's World Economic Outlook (released in January 2026), projected growth rates for 2026 are estimated at around 2.3% for the United States, 1.0% for the euro area, 1.2% for Japan, and 6.5% for India. China's GDP growth target clearly places it among the leading performers globally.

Thirdly, the 2026 growth target is strategically aligned with China's 2035 long-range objectives, which aim to double its 2020 per capita GDP to reach the level of a moderately developed country by 2035. Achieving the target requires an average annual growth rate of over 4.7% between 2021 and 2035. The 4.5–5% target for 2026 provides solid support for this long-term goal.

China is currently rolling out a series of policies and measures to advance economic restructuring and unlock economic growth potential.

On the consumption side, efforts are being made to strengthen the foundation for consumption by adhering to the principle of distribution according to work and increasing the share of labor remuneration in primary distribution. The policy framework for factor-based distribution is being improved to expand income from multiple channels, including operational and property income, while redistribution mechanisms such as taxation, social security, and transfer payments are being enhanced to promote equity.

On the investment side, the focus is on expanding effective investment and optimizing its structure. Priority is given to technological upgrading in manufacturing, equipment renewal, and investment in high-tech and strategic emerging industries. At the same time, improvements are being made to logistics infrastructure, including national logistics hubs and multimodal transport systems, to reduce overall logistics costs. Efforts are also underway to stimulate private investment by removing market access barriers and improving financing support policies.

On the supply side, measures are being implemented to upgrade service consumption and remove unreasonable restrictions in consumption sectors, thereby unleashing the potential of culture, tourism, sports events, and elderly care. New business models, formats, and consumption scenarios are being piloted to drive consumption upgrading.