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China This Week | Response to Iran war, Two Sessions meeting, and more heads roll

March 08, 2026 4 min read International Relations GS2
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What Happened

  • China's annual Two Sessions (Lianghui) — the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC) — concluded in early March 2026 with Premier Li Qiang's Government Work Report setting a GDP growth target of 4.5-5% for 2026, the first time since 1991 that the target fell below 5%.
  • The 15th Five-Year Plan (2026-2030) framework was approved, prioritising "investing in people," industrial upgrading, technological self-reliance, and a 17% cumulative reduction in carbon intensity over the plan period.
  • On the Iran conflict, China maintained its position of neutrality — calling for de-escalation and a ceasefire while avoiding direct condemnation of any party — even as more than 3,000 Chinese citizens were evacuated from Iran and the Belt and Road Initiative's China-Central Asia-West Asia Economic Corridor faced severe disruptions.
  • The fiscal deficit ratio was raised to 4% of GDP, signalling Beijing's willingness to use fiscal stimulus to offset external headwinds from the West Asia conflict and global trade fragmentation.

Static Topic Bridges

China's Two Sessions (Lianghui): Structure and Significance

The Two Sessions refer to the annual plenary sessions of China's two top legislative and advisory bodies: the National People's Congress (NPC) — formally China's highest legislative organ — and the Chinese People's Political Consultative Conference (CPPCC), a political advisory body. Held concurrently each March, the Two Sessions function as China's principal mechanism for announcing major economic targets, policy priorities, and legislative changes. While decisions are made by the Communist Party's inner circle, the Two Sessions provide formal ratification and public communication of key policy directions.

  • The NPC has approximately 2,977 delegates elected indirectly through provincial people's congresses; it formally elects the President, Premier, and other top officials during the transition year.
  • The CPPCC has approximately 2,172 members representing 34 sectors and groups, including non-Communist parties, ethnic minorities, and overseas Chinese.
  • The Premier's Government Work Report (GWR) is the most closely watched document — it sets GDP, inflation, unemployment, and fiscal targets for the year.
  • The GWR is presented on the first day of the NPC and approved by a vote of delegates; it functions as China's economic policy roadmap.
  • The Five-Year Plan (FYP) is the central medium-term planning document; the 15th FYP covers 2026-2030.

Connection to this news: The 2026 Two Sessions assumed unusual significance because they coincided with both the start of the 15th FYP cycle and the ongoing Iran-West Asia conflict, requiring Beijing to balance ambitious structural reform goals against an unpredictable geopolitical shock.

China's Belt and Road Initiative and West Asia Vulnerability

The Belt and Road Initiative (BRI), announced in 2013, is China's flagship geo-economic strategy linking Asia, Europe, Africa, and Latin America through infrastructure investment and trade corridors. The China-Central Asia-West Asia Economic Corridor (CCWAEC) is one of the six original BRI corridors, running from Xinjiang through Central Asia and into West Asia — including Iran, which signed a 25-year Comprehensive Strategic Partnership with China in 2021, positioning it as a critical BRI node.

  • China is Iran's largest trading partner; bilateral trade under the 2021 partnership was projected to reach $600 billion over 25 years.
  • The CCWAEC relies on Iran as a transit and trading hub; the conflict has effectively suspended significant BRI operations in this corridor.
  • China has investments in Iranian ports, railways, and oil infrastructure — all now at risk.
  • More broadly, East Asian economies (China, Japan, South Korea) import approximately 60% of their oil from the Middle East; the Strait of Hormuz blockade directly threatens Chinese energy security.
  • The war has exposed the contradiction in China's BRI model: security risk in partner countries can rapidly destroy infrastructure investments that took years to build.

Connection to this news: The 2026 Two Sessions' GDP target downgrade to 4.5-5% partly reflects the economic drag from West Asia disruption; China's neutrality on the Iran conflict is a calculated attempt to protect BRI investments while avoiding direct confrontation with the US.

China's 15th Five-Year Plan: Key Priorities

China's Five-Year Plans are the central instruments of medium-term economic planning. The 15th FYP (2026-2030) marks the transition period toward the "second centennial goal" of becoming a "modern socialist country" by 2049. The plan was finalised against a backdrop of trade fragmentation, AI-driven technology competition, and geopolitical instability.

  • Carbon intensity target: 17% cumulative reduction in CO2 per unit of GDP over 2026-2030 (continuing China's NDC commitments under the Paris Agreement).
  • Technology self-reliance: Increased R&D spending target; focus on semiconductors, AI, quantum computing, and advanced manufacturing ("Made in China 2025" successor priorities).
  • "Anti-involution" campaign: Addressing overcapacity and price wars in key industries (EVs, solar panels, steel) that generate trade friction with partners.
  • Human capital: Elevated "investing in people" as a strategic priority — education, healthcare, and social security reforms.
  • Fiscal deficit at 4% of GDP: The highest in decades, signalling aggressive counter-cyclical fiscal posture.

Connection to this news: The 15th FYP must be executed against a geopolitical backdrop of BRI disruption and US-China tech rivalry; China's lower growth target creates policy space to pursue structural quality improvements rather than raw output growth.

Key Facts & Data

  • China 2026 GDP growth target: 4.5-5% (first time below 5% since 1991).
  • Fiscal deficit target 2026: 4% of GDP (historically high).
  • CPI inflation target: approximately 2%; urban unemployment ceiling: approximately 5.5%.
  • 15th Five-Year Plan period: 2026-2030; approved at 2026 Two Sessions.
  • Carbon intensity reduction target (15th FYP): 17% cumulative over 2026-2030.
  • China-Iran 2021 Comprehensive Strategic Partnership: 25-year pact, projected $600 billion in trade.
  • Chinese evacuees from Iran: over 3,000 citizens evacuated amid 2026 conflict.
  • East Asian oil import dependence on Middle East: approximately 60% of total oil imports.