China's 2026 GDP growth target of 4.5-5 per cent is the lowest in three decades, signaling deep economic challenges. While presented as realistic, the real worry is persistent deflation and weak consumer demand. CPI inflation has hovered near zero for three years, and the GDP deflator has fallen since 2023, marking the longest negative streak since China's economic reforms. Policymakers are not acting boldly enough to hit the 2 per cent CPI target, according to Tianlei Huang.

The root cause is overcapacity, creating a vicious cycle with limp consumer spending. Nearly 70 per cent of household wealth is tied up in property, yet the government's work report offers no new measures to resolve the property slump, relying instead on a slow supply-demand rebalance. This inaction risks a lost decade of deflation.