At its National People’s Congress, China’s government set its target for economic growth in 2026, which was just below its target in 2025. China’s economy has seen slower levels of expansion in recent years amid property market troubles and soft domestic demand. Looking at 2026, these factors, combined with geopolitical and trade uncertainty, weigh on its outlook. Geopolitical tensions have escalated in 2026. The Middle East conflict continued yesterday, but US President Donald Trump said the end may be nearing.

• China’s federal government has set its target for economic growth this year at 4.5% to 5.0%. This is down slightly from the 5.0% economic growth targeted last year, which was in line with actual growth in China’s economy.
• After seeing years of outsized growth, which took China’s economy to the second largest in the world, Beijing believes that annual growth rates may moderate. This year, China’s economy continues to face several challenges, such as geopolitical tensions and policy uncertainty in the US.
• China’s trade activity was robust to start 2026. From January to February, exports increased by 21.8% from the same period last year. Imports also surged higher, rising by 19.8%.
• Amid the uncertainty is the impact of the conflict in the Middle East. Yesterday, the US and Israel ramped up its strikes against Iran, while Iran struck other nations in the area. Leaders from the Group of Seven (G7) countries are working on scenarios to release oil to the market, which helped push oil prices lower.

While the war in the Middle East persisted yesterday, investors are hoping that US President Trump is correct in his assessment that the conflict may end soon. Geopolitical tensions raise uncertainty, which is showing in the choppiness of financial and commodity markets in recent days. The unpredictability also carries over the governments around the world, like China’s, as evidenced by its lower target for economic growth this year.

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