China’s government has set the country’s annual increase in defence spending to 7%, in its draft budget for 2026.
The target disclosed at the opening of its annual national congress, was slightly lower than the around 7.2% annual increase in the last three years.
In his annual government work report at the congress, Chinese Premier Li Qiang stated that China needs to achieve “solid gains in military training and combat readiness.”
That came as Xi Jinping’s purge of China’s military widened, including the removal of nine military officers from the congress last week, as China speeds up its goals of modernizing its army in the coming few years.
Also, China set its lowest economic growth target since 1991.
Li unveiled an economic growth target of 4.5% to 5% for 2026, the lowest target since 1991, and the first downgrade following an official “around 5%” target set for between 2023 and 2025.
The lower target follows a yearslong property sector slump that sent home prices tumbling, weakened domestic consumption and investment confidence and led to massive job losses.
In addressing China’s domestic economic challenges, officials pledged to stabilize the housing market by controlling new supply and reducing inventory.
Li also reiterated the importance of boosting domestic consumption, although China’s funding of 250 billion yuan ($36 billion) earmarked for consumer goods trade-in subsidies was lower than last year’s 300 billion yuan.
The report said that the government would issue 250 billion yuan ($36 billion) in bonds for rebates to consumers who trade in cars, appliances and other products for new ones.
Li stated that city-specific policies to control new housing supply and reduce unsold properties will be used to stabilize the property market.
Despite the US-China trade war, China said it had met its official 5% economic growth target last year. That was largely thanks to its record trade surplus of almost $1.2 trillion under an export boost to regions such as Europe and Latin America. “What we achieved in 2025 was indeed hard won,” Li said in his speech.
The report said that free trade is under severe threat, noting rising geopolitical risks. At home, it highlighted an “acute” imbalance between strong manufacturing supply and weak demand and the challenge of shifting to new drivers of growth.
“Rarely in many years have we encountered such a grave and complex landscape, where external shocks and challenges were intertwined with numerous domestic difficulties and tough choices.”
Li Qiang
On Taiwan, the self-ruled island which Beijing has for decades claimed as its own, Li stressed that Beijing will “resolutely fight against” separatist forces.
China Releases Five-year Plan Draft
Beijing also released the full draft of its five-year plan up to 2030 outlining its economic and political policy priorities, with a focus on boosting self-reliance in areas like artificial intelligence, robotics and other advanced technologies as China’s rivalry with the US heats up.
In the full draft of its five-year plan up to 2030, Chinese leaders set out an ambition to achieve technological self-reliance to rival the US.
The draft plan outlined goals in advancements in areas including artificial intelligence, robotics, semiconductors, biomedicine, quantum technology and aerospace.
To ensure innovation breakthroughs, Chinese officials projected an annual average growth of at least 7% in nationwide spending on research and development.
On climate targets, China, the world’s largest polluter, said it would continue with its renewable energy push and to reduce carbon emissions.
For the five years to 2030, Beijing has set a goal of reducing carbon emissions per unit of gross domestic product by 17%, compared to the 18% cutback target in the previous five years.
China, like many other parts of the world, is also facing a demographic crisis as its population ages and birth rate falls. Its 1.4 billion population declined for a fourth straight year last year, falling by about 3 million in 2025 from the year before.
Chinese officials vowed to build a “fertility-friendly society” with policies aimed to address education, employment, as well as child care and health care support in the hopes of encouraging more births.
The weeklong congress is expected to approve the five-year plan in coming days.
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