We’ve neglected China recently, distracted by other things. But there’s a lot going on. Notably, the annual “two sessions” policy marathon is coming to a close. There’s was a big emphasis on economic objectives this year, with the release of a new five-year economic plan as the government struggles with slowing growth, the property bust, and deflation.
The biggest headline has been China’s 4.5 per cent to 5 per cent GDP growth target for 2026, the lowest in 30 years. That is not as alarming as it sounds, given that growth came in at 5 per cent last year — it is a realistic, achievable target that “does not mean collapsing growth”, says Rory Green at TS Lombard. The real worries continue to be consumer demand and deflation. CPI inflation has been hovering around zero for three years:
The GDP deflator, which measures price changes for domestic production, has been falling since 2023, the longest negative streak since China transitioned towards a market economy in the 1970s: