On Thursday (March 5), the Chinese government announced a GDP growth target of 4.5-5% for 2026. Not only is this below the 5% growth achieved in each of the last three years, but it is also the lowest target in more than 30 years.The reduction in the growth objective may not be completely unexpected, considering the world’s second-largest economy ended 2025 with a new record trade surplus of $1.2 trillion (to put this number in perspective, India’s total merchandise and services exports in 2025 stood at $862 billion).However, maintaining never-seen-before levels of growth has been a problem for China for some years now – apart from the low-base effect that fuelled the 8.6% growth in 2021, owing to the effects of Covid-19 in 2020, the annual GDP growth has been under 7% since 2016.It is, perhaps, not a surprise then that the Chinese government is looking beyond just the most popular metric of economic growth. In February, the Communist Party began a five-month-long campaign to drill down among its members a “correct view on what it means to perform well”, state-run Xinhua news agency said on Tuesday, with the focus on a “people-centered approach”.According to Zhou Zheng, a senior analyst at the China Macro Group, the party’s top leadership “had grown weary of the frivolity of chasing GDP growth and all of the subsequent problems,” the South China Morning Post reported on February 27.A sub-5% growth rate is not necessarily bad news, with analysts at Trivium China saying on Thursday slower growth is “just what the economy needs”. “A lower growth target allows officials to focus on the structural problems facing the economy, such as high levels of local government debt, low household spending, and a national market plagued by internal barriers to trade and investment.”Also Read | Explained Interview | Why Evergrande collapsed, and the limits to China’s debt-fuelled, property-centric growth modelAnother problem is overcapacity, with Bai Chong-En, Dean of School of Economics and Management at Beijing’s Tsinghua University, telling The Indian Express in October 2025 that he would be “very happy” even with a growth rate of 4% given the stage the Chinese economy is at and the need to absorb the real estate shock. In a speech in January at a China Finance 40 Forum seminar, Bai called for “investing in reform”.Story continues below this adIt is also possible that government policy is becoming increasingly inefficient at producing desired results. According to Logan Wright, Partner and Director of China Markets Research at Rhodium Group, the weakness in the Chinese economy is a sign of “prolonged decay” and its roots lie in the country’s fiscal and financial systems.“Beijing primarily influences the domestic economy through controls on the direction of domestic credit and government spending. But the overextension of these tools for political purposes over the past two decades has exhausted their effectiveness and capacity to guide China’s economy today,” Wright wrote in a note on Tuesday, pointing out that fraction of new loans going to “unproductive local government and state-owned enterprises” is rising to ensure they don’t collapse.With these same institutions responsible for government expenditure, investment and growth outcomes are naturally worse than before.The various problems faced by China – the collapse of the housing market, weak consumption, falling birth rate, an aging population, high youth unemployment, and a high savings rate, among others – and possible solutions to them have been well chronicled. What we definitely know is that given the weakness in the domestic economy, exports have become an increasingly stronger driver of economic growth.Story continues below this adIn 2025, China’s record trade surplus of $1.2 trillion contributed to almost a third of the headline GDP growth rate of 5% – the most in almost three decades. And, it is the sectors with weak domestic performance that have seen some of the strongest export growth, according to a July 2025 study by the European Central Bank.One such segment is New Energy Vehicles (NEVs), such as electric vehicles. In January, while domestic NEV sales were down 19% year-on-year, exports more than doubled. These sectors with rapid export growth are driving investments at a time when the government has clamped down on price wars resulting from overcapacity through its anti-involution drive.Another area to have seen an investment boom is artificial intelligence (AI). Citrini Research’s February 22 Substack post ‘2028 Global Intelligence Crisis’ led to a rout of tech and financial companies’ stocks. But a Chinese version of the piece by venture capitalist Bob Chen of BroadVision Fund suggested the same doomsday-like scenario may not play out in China: “SaaS never truly took off in China… By 2028, people suddenly realised: if SaaS couldn’t eat this world, AI wasn’t going to take a bite, either.”Whether or not China’s manufacturing-heavy economy and labour force will be able to withstand the AI wave is yet to be seen, but the new technology could also offer a way out for a government that has failed to reverse the effects of the one-child-policy on its demographics – the number of Chinese aged 60 years and above is expected to rise from 320 million now to more than 400 million in the next 10 years. With China’s birth rate falling to a new low in 2025, AI, automation, and robots could help sustain growth in the future by countering the hit from a smaller labour force.