Why security, not growth, is likely to command China’s attention in 2026

China achieved its twin goals of tech advancement and macro stability in 2025. Its goals for 2026 remain the same. However, a rapidly deteriorating global security environment is likely to shift national priorities towards preparation for worst-case scenarios.

Oil supplies and sea lanes are becoming insecure. The US-China trade war could reignite at any time. China will have to accelerate its goals of energy and technology self-sufficiency to enhance national resilience. Fighting for sea lane security could be the biggest risk event in 2026.

On the domestic front, China achieved its gross domestic product (GDP) growth target of “around 5 per cent” in 2025. The nominal GDP figure is likely to have risen by 4 per cent. With the currency appreciating at least 3 per cent against the dollar, GDP in dollar terms is up 7 per cent from the year before.

This is backed up by growth in physical activity. For example, in the first 11 months of 2025, electricity consumption rose by 5.2 per cent, rail cargo turnover was up 3.3 per cent, highway cargo turnover up 3.7 per cent, port turnover of foreign trade up 4.1 per cent and passenger turnover on rail up 3.6 per cent. When such metrics increase by 3-4 per cent, simultaneous improvements in quality can justify a growth rate of 5 per cent.

Analysts may stress the roughly negative 1 per cent fluctuation in the GDP deflator last year to portray a poor picture. That would be missing the point. M2, a broad measure of how much money is circulating as well as of deposits in the economy, rose 8 per cent in the first 11 months, faster than nominal GDP.

Price declines could be explained by competition forcing a conversion of productivity gains into lower prices. For example, as car prices fall amid enhanced quality and technology, the industry’s profitability could improve.

South China Morning Post