China’s era of rapid growth draws to a close… Xi Jinping’s one-man rule put to the test

DEEP INSIGHT

Key watch points for China’s biggest political event, the “Two Sessions,” opening on the 4th–5th

Will it unveil a “4%-handle growth target” for the first time ever?

Slowdown, weak domestic demand cloud export outlook

Cutting below 5% could trigger a backlash including capital outflows

Likely to defend growth via local bond issuance and infrastructure spending

A high-stakes bid to lead the tech supremacy race in AI, robotics and more

National development plans to be elevated into law and institutionalized

Reinforcing continuity and execution of mid- to long-term strategy

Xi to decide on a fourth term next year … bolstering one-man rule

Focus on whether military purges will continue to secure power

Defense spending up in the 7% range for a third straight year to modernize the PLA

On Taiwan, likely to stress excluding external interference

China’s biggest political event, the “Two Sessions” (兩會), will open starting with the Chinese People’s Political Consultative Conference (CPPCC) on the 4th and the National People’s Congress (NPC) on the 5th. Encompassing the CPPCC, a policy advisory body, and the NPC, the legislature, the Two Sessions are where the Chinese Communist Party leadership formally sets the policy line. Experts say this year’s key words will be defending growth, securing technological dominance, and stabilizing the regime.

First outlook for a 4%-handle growth target

China’s era of rapid growth draws to a close… Xi Jinping’s one-man rule put to the testView larger imageOne of the core issues at the Two Sessions is the GDP growth target for the year. It is unveiled in the government work report to the NPC, and it effectively determines the stance of fiscal and monetary policy and the scale of local-government bond issuance.

Since 2023, the growth target presented at the Two Sessions has consistently been “around 5%.” Each year, the target was met. This year will not be easy. Structural challenges are becoming more pronounced as a slowdown, weak domestic demand, a prolonged property-market downturn, and high youth unemployment converge. On top of that, U.S. checks and pressure on China—seen as seeking to reshape the global order—are intensifying.

Beijing-based experts believe there is a strong chance that this year’s Two Sessions will, for the first time ever, set a growth target in the 4% range. The most likely scenario is 4.5–5%. Since the founding of the People’s Republic, China has never set a growth target below 5% even once.

But this year is different. More than 20 of China’s 31 provincial-level governments have lowered their growth targets from last year. Among the 10 largest provincial-level economies, eight also set lower targets than a year ago.

Still, the possibility of again presenting a flexible target of “around 5%” cannot be ruled out. This year is the first year of the 15th Five-Year Plan (2026–2030). Lowering the target below 5% would impose significant political and economic costs on the leadership. A 4%-handle target could be seen as a signal that China’s rapid-growth phase has ended. It could be interpreted as waning confidence among China’s leaders, triggering aftershocks such as greater stock-market volatility and a large-scale withdrawal of foreign capital.

For that reason, some observers say the authorities may present a target range that preserves policy flexibility while keeping the fiscal deficit ratio—expanded to 4% last year—unchanged. China’s strategy is to maintain an “expansionary fiscal” stance to offset the property-market slump and weak domestic demand. By expanding local-government bond issuance and stepping up infrastructure investment, Beijing may try to achieve growth of around 5%. In tandem, it is likely to use a package of measures—tax cuts, increased investment in strategic industries, and management of local-government debt—to spur consumption. It is expected to signal its intention to raise the consumption share of GDP from around 40% to 45%.

Putting the “tech rise” on a legal footing

The 15th Five-Year Plan to be finalized at this year’s Two Sessions will clearly reflect China’s strategic choices amid slowing growth and a reordering global landscape. Beyond declarative goals such as technological self-reliance, strengthening advanced manufacturing, and stabilizing supply chains, the plan is likely to lay the foundation for new-industry policies under a regime of “moderate-speed growth.”

A prime example is legislation on a National Development Planning Law, expected to be adopted for the first time ever at this year’s Two Sessions. The core of the bill is to codify the entire process—drafting, review, approval, implementation and oversight—of the Five-Year Plans, the centerpiece of China’s national development strategy. Until now, China has operated its medium- to long-term economic blueprint through political and administrative procedures: Party proposals, compilation by the State Council, and approval by the NPC. National strategies such as industrialization, urbanization, and fostering advanced technology have been managed as intra-Party rules or policy documents.

The aim is to elevate this national development planning system into law through this year’s Two Sessions and institutionalize it. Experts view it as a major institutional shift that will indicate the direction of China’s economic governance model, as it would bring a planning system that has continued for more than 70 years into a formal legal framework for the first time.

If implemented, the Chinese government could run long-term development strategies more stably and sustainably. Many analysts say this reflects an acute need to strengthen policy continuity and execution to cope with structural challenges such as intensifying U.S.-China competition in advanced technology, a reconfiguration of global supply chains, and a slowdown in growth. Some see it as an attempt to pursue a mid- to long-term structural transition rather than temporary, short-term stimulus.

A person familiar with the matter said, “China aims to provide a legal foundation for drawing up a national development blueprint,” adding, “Codifying procedural standards in the planning process can strengthen policy continuity, execution, and oversight.” The person also said it could “enhance consistency in policies to foster strategic industries,” and assessed that it would “institutionalize China’s governance structure one step further beyond simply streamlining administrative procedures.” In other words, by further strengthening state-led investment in strategic industries such as semiconductors, artificial intelligence (AI), robotics, and next-generation communications, China could pursue not merely industrial policy but a structural shift in its growth model.

An official at a Beijing-based research institute said, “China’s tech rise stands out, but advanced technology has not yet played a central role in lifting productivity across the broader Chinese economy,” adding, “There is a calculation that scattered innovation and investment alone will ultimately make it difficult to surpass the United States.”

Hard line on Taiwan

China’s foreign-policy stance is also expected to come through clearly. U.S. President Donald Trump is set to visit China from the 31st through April 2 to hold a summit with Chinese President Xi Jinping. With U.S.-China global strategic competition ongoing, China’s principles for responding to tariffs, technology controls, and supply-chain reconfiguration—articulated during the Two Sessions—are likely to influence the summit as well.

China has continued to criticize U.S. “America First” policies and interference in its internal affairs. At the same time, it has emphasized that a stable relationship benefits both countries. Accordingly, this year’s Two Sessions is expected to reaffirm the principle of safeguarding core interests under a posture of mutual respect and avoiding confrontation.

On Taiwan, China may take a clearer stance than before while adhering to the “One China” principle, most likely by stressing opposition to Taiwan independence and to external interference. The broad policy of opening up is likely to remain in place, as China seeks to pursue both foreign investment attraction and export diversification amid supply-chain shifts and the spread of U.S. protectionism.

Further consolidation of Xi’s one-man rule

The one-man system centered on Xi is expected to strengthen further. Whether Xi seeks a fourth term will be decided at next year’s 21st National Congress of the Chinese Communist Party. With a little over a year to go, a climate of internal vetting already appears to be underway.

Follow-up handling of the cases of Zhang Youxia, the No. 2 figure in the military, and Liu Zhenli—both purged early this year on allegations of serious disciplinary and legal violations—could also be addressed at this year’s Two Sessions. This year’s meeting could become a stage on which Xi showcases the stability of his power at home and abroad.

Defense spending is expected to be set at a level similar to last year’s. China has increased defense outlays by more than 7% for three consecutive years, accelerating military modernization. Next year marks the 100th anniversary of the founding of the People’s Liberation Army. Analysts say China is continuing a national governance strategy that combines political, military, and economic policy by steadily expanding defense spending alongside fiscal outlays.

A person in Beijing’s diplomatic circles said, “This year’s Two Sessions will show how the central axes of economic recovery, technological self-reliance, political stability, and foreign-policy posture function,” adding, “It is a barometer for gauging the direction of future Chinese policy amid U.S.-China competition for trade and technological supremacy, and with China’s economy also at a structural inflection point, this year’s Two Sessions is drawing especially close attention.”

Beijing=Eunjung Kim, correspondent kej@hankyung.com