China Cuts GDP Growth Target to Lowest Since the 1990s

China just announced its GDP growth target for 2026, and it's the lowest in decades. The government is aiming for 4.5% to 5% growth, down from around 5% in 2025. That might not sound like a big drop, but for China, it's a massive shift.

This is the lowest growth target since the 1990s. For context, China averaged over 10% growth for years. Even during the global financial crisis in 2008, they managed to keep growth above 6%. The days of double digit expansion are long gone.

The International Monetary Fund projects China will hit 4.5% growth in 2026. That's in line with the government's target, but it's a far cry from what China used to deliver. The world's second largest economy is slowing down, and everyone feels it.

Why the slowdown? The property market is the biggest problem. Real estate makes up about 70% of Chinese household wealth. Families in China don't invest much in stocks. They put their savings into apartments and houses. When property values fall, Chinese families feel poorer. When they feel poorer, they spend less. Consumer spending has been weak for months.

New home sales fell 14% in 2024. Prices are still dropping, though the pace of decline is slowing. Analysts don't expect the property market to stabilize until late 2026 or even 2027. That's a long time to wait for recovery.

Domestic demand is weak across the board. Chinese consumers are saving more and spending less. Retail sales growth has been disappointing. Youth unemployment remains high, hovering around 15% to 18% depending on how you measure it. Young people can't find good jobs, so they're not buying homes or starting families.

Meanwhile, China is spending more on defense. The government announced a 7% increase in military spending, bringing the defense budget to $270 billion. That's the biggest jump in years. Money going to the military is money not going to economic stimulus.

Export growth has been strong, with shipments to global markets up 21.8% in the first two months of 2026 combined. But that's creating tension with trading partners. The US, Europe, and other countries are complaining about Chinese overcapacity flooding their markets with cheap goods.

China is also dealing with deflation. Factory prices have been falling for 40 consecutive months. The producer price index dropped 1.4% in February. Falling prices sound good for consumers, but they're terrible for an economy. Deflation makes debt harder to pay off and discourages investment.

When China slows, the world slows. China is the largest trading partner for over 120 countries. If Chinese demand weakens, everyone from Germany to Australia to Brazil feels it. Global growth forecasts are being cut because of China's struggles.