CWA # 2053
The World This Quarter
China’s Domestic Landscape (Jan-Mar 2026):
The "Two Sessions," Recalibrated growth targets, Technology prioritization, and Military purges
The first quarter has seen a significant sharpening of China’s domestic trajectory, characterized by the consolidation of economic trends, a renewed emphasis on technological self-reliance, and a tightening of political discipline
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Anand V
5 April 2026
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During the first quarter (Jan-Mar 2026), the intersection of economic pragmatism, military modernization, and internal political consolidation has created a high-stakes landscape for China’s leadership. The year started with Xi Jinping urging a continued fight against corruption with renewed vigour at the annual plenary session of the Central Commission for Discipline Inspection, the Communist Party of China’s (CPC) anti-corruption body. This was followed by a series of high-level purges with the People’s Liberation Army (PLA), as well as the conclusion of a high-profile national security case in Hong Kong, reinforcing Beijing's control over the territory. Towards the end of the quarter, the “Two Sessions” – China’s annual plenary meeting of the National People’s Congress (NPC), the national legislature and the Chinese People's Political Consultative Conference (CPPCC), the national advisory body, were held. During the NPC session, the government’s annual work report, China’s growth trajectory, and the 15th Five-Year Plan (2026-2030) were approved along with the passage of a landmark law on ethnic unity, setting the domestic agenda not just for the rest of the year but also for the remainder of the decade.
1. The "Two Sessions" and the “Law on Promoting Ethnic Unity and Progress”
During the “Two Sessions” held in March 2026, China passed the “Law on Promoting Ethnic Unity and Progress” at the NPC. The law codifies Xi Jinping’s call to deepen unity among China’s various ethnic groups through measures, including the use of standard Chinese as the primary language of education even in ethnic minority areas. The law has once again re-ignited international criticisms about the Party’s efforts at assimilating the ethnic minorities in China. However, unlike in previous instances of similar domestic developments creating diplomatic friction, the latest one has been overshadowed by the escalation of conflict in West Asia.
2. Jimmy Lai and the tightening of Beijing’s control of Hong Kong
In Hong Kong, the high-profile national security case involving Jimmy Lai, the founder of the now-defunct Apple Daily tabloid, concluded in March. Lai was found guilty of crimes including colluding with foreign forces and sedition, and was sentenced to 20 years of imprisonment, the challenge to which was dropped by Lai. This ended a landmark trial that was followed internationally for its significance as a litmus test of press freedom in Hong Kong after the imposition of the 2020 National Security Law. The verdict can therefore be seen as the final confirmation of Beijing’s tightened control over Hong Kong.
3. Setting a modest economic growth
On the economic front, China set a modest 4.5-5 per cent growth target for 2026 during Premier Li Qiang's presentation of the annual government work report at the opening session of the NPC. It was declared that China grew by 5 per cent in the previous year, meeting the earlier set target. The government has yet again emphasized that the nature of the growth projected is targeted towards ensuring stability and enabling more stress on “high-quality development” and “investment in people”. The annual growth target for 2026 continues the past trend, reflecting the well-established “new normal” of an economic slowdown in China, amid declining external and internal demand. The focus, however, has strengthened towards deepening the development, adoption and exploitation of “new quality productive forces.”
4. Semiconductors, AI, Sixth-generation telecommunication and the Emphasis on advanced technology
China’s new Five-Year Plan emphasises heavily on technology. China aims to expand advanced technology infrastructure, including Artificial Intelligence, sixth-generation telecommunications, and space-based internet services, as well as the manufacture of high-performance AI chips and the generation of green energy for computing. The plan elevates the AI Plus initiative of 2024, which seeks to integrate AI into 90 per cent of China’s economy by 2030 as a top national priority.
Semiconductors, being an essential ingredient in this effort, has become a vital part of the policy discourse. An article authored by China’s top semiconductor executives in February 2026 has urged the industry to build China’s own semiconductor manufacturing equipment, reducing reliance on the Dutch firm ASML, which holds a monopoly in the sector. China has apparently reverse-engineered older ASML machines to build its own capability. China has also started approving the H200 Graphics Processing Units from Nvidia, whose exports were relaxed by the US administration as part of the ongoing relaxation of the Trade War between the US and China. The resumption of H200 shipments addresses the immediate computational deficits within China’s AI sector while simultaneously providing a window for long-term indigenous development through potential reverse engineering.
China’s AI sector witnessed a sharp growth during the first quarter of 2026. Startup firms Zhipu AI and MiniMax, among China’s rising “AI tigers,” released their new Large Language Models – the GLM-5 and the M2.2, respectively. Alibaba Group Holding and Moonshot AI also released their Qwen3-Max-Thinking and Kimi K2.5 models, respectively. Nvidia CEO Jensen Huang referred to yet another model, OpenClaw, as the “next ChatGPT.” However, the US AI firm Anthropic alleged in February that top Chinese AI firms like DeepSeek, Moonshot AI, and MiniMax AI used fraudulent accounts to “distill” (a term used to describe training AI models using outputs from superior systems) its Claude AI model.
The first quarter of 2026 also saw a continued influx of high-calibre Chinese scientists repatriating from Western institutions, driven by a growing disparity between China’s robust research incentives and the heightened geopolitical risks of remaining in the West. The top returnees during this period included those working in areas such as Artificial Intelligence, semiconductors, quantum technology, virology, biochemistry and chemical engineering, further adding to the human capital needed for China’s self-sufficiency in the techno-industrial domain.
5. Military purge
On the military and security front, Xi Jinping’s anti-corruption drive recorded high-profile casualties in the first quarter, including those from the military and the defence industry. The most prominent among them were two of China's top generals, members of the Central Military Commission, the highest decision-making body for the military. Zhang Youxia, the Vice-Chairman of the CMC, and Liu Zhenli, a member of the Commission, were removed from their positions and put under investigation in January. Zhang Youxia is a former Xi ally and China’s highest-ranked general; speculation has circulated over the past year about a political struggle between Xi and Zhang for control of the military, leading to several high-level purges within the CMC. In fact, Xi has been reiterating his call for loyalty within the PLA for his leadership within the Party. With this final act of “political rectification”, of the seven members of the CMC, only Xi (as the Chairman) and Zhang Shengmin (who leads the military’s anti-corruption agency) remain in their positions, with Zhang being the only uniformed member remaining on the Committee.
In addition to purges within the highest ranks of the military, top scientists involved in prestigious strategic and defence projects were also apparently targeted in Xi’s anti-corruption campaign. The names of several scientists, including top Chinese chief scientists working on the design of important weapons programmes such as nuclear weapons, missiles, radars, high-power microwave (HPM) weapons, and the stealth fighters, were removed from the Chinese Academy of Sciences website, indicating the initiation of corruption investigations against them. Recent speculations suggest that the underperformance of Chinese air defence systems in Venezuela and Iran during American aerial engagements has catalysed some of these removals. Another important development has been the opening of corruption investigations into Xiao Jie, a senior official in Hainan province who played a leading role in building the artificial islands in the South China Sea, on which military installations were subsequently built.
Recent speculations suggest that the underperformance of Chinese air defence systems in Venezuela and Iran during American aerial engagements has catalysed some of these removals.
Another important development has been the opening of corruption investigations into Xiao Jie, a senior official in Hainan province who played a leading role in building the artificial islands in the South China Sea, on which military installations were later built.
To conclude: China in the first quarter (Jan-Mar 2026)
The first quarter has seen a significant sharpening of China’s domestic trajectory, characterized by the consolidation of economic trends, a renewed emphasis on technological self-reliance, and a tightening of political discipline. Xi has seemingly taken the upper hand in the governance of the Party and the military, at least for now, with the landmark purge engineered in the CMC. The crackdown on the military and the defence industry has intensified since 2023 and has possibly reached a crescendo. Moreover, Xi has set the economic narrative for the next half-decade. Further, a strengthened hold over ethnic minority areas and special administrative regions like Hong Kong creates a more stable domestic situation for China as it seeks to navigate growing global uncertainty.
About the author
Dr Anand V is an Assistant Professor (Senior Scale) at the Department of Geopolitics and International Relations, Manipal Institute of Social Sciences, Humanities and Arts, Manipal Academy of Higher Education, Manipal, India
