China has set a 5% economic growth target for 2025, signaling its resolve to navigate significant internal and external challenges, including a persistent trade war with the United States and domestic deflationary pressures. Premier Li Qiang unveiled the growth goal during his annual work report to the National People’s Congress in Beijing on Wednesday.
This marks the third consecutive year China has targeted a growth rate around 5%, despite facing mounting hurdles. While the target reflects the government’s commitment to stability, analysts suggest that achieving it may prove difficult due to ongoing global trade tensions and internal economic struggles.
To bolster growth, China has set a record fiscal deficit target and announced plans for substantial government bond issuance. The report emphasizes the need to stimulate domestic consumption, which for the first time in over a decade has been made a top priority by President Xi Jinping’s administration.
Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group, noted that the growth target reflects China’s determination to counteract external uncertainties and trade friction with the U.S. “It’s an ambitious target, and it means the authorities will still need to provide substantial support to sustain growth,” Yeung said.
The announcement came on the heels of fresh U.S. tariffs on Chinese goods. Just a day before Li’s speech, President Donald Trump imposed an additional 10% levy on Chinese imports, a move that threatens to further strain the export sector, which last year contributed nearly a third of China’s economic growth. If Trump escalates the tariff rate to the 60% level he had suggested during his campaign, China’s economic expansion could be severely impacted.
As Premier Li outlined his economic strategy, China’s financial markets saw mixed reactions. The offshore yuan weakened by 0.2% against the U.S. dollar, while the country’s 10-year government bond yields slipped marginally. On the equity front, the Hang Seng China Enterprises Index initially surged by 2.5% before retreating, and the CSI 300 Index saw slight losses after a brief uptick.
A comprehensive fiscal stimulus package was a key feature of Li’s report. The government has pledged to increase the sale of special sovereign bonds to fund infrastructure projects and consumption subsidies, with a total deficit target of 9.9% of GDP — the highest in over three decades. The funds will be allocated to consumer subsidies, doubling the previous year’s allocation, as well as infrastructure development and supporting businesses in upgrading their operations.
In a bold shift in policy priorities, the term “consumption” was mentioned 27 times in the report, reflecting the government’s focus on stimulating domestic demand. This is the first time in recent years that consumption has taken precedence over high-tech development in China’s economic policy agenda. In contrast, “high-quality development” — a term championed by Xi to promote advanced manufacturing — was notably less emphasized.
While the government introduced several measures aimed at improving social welfare, such as increasing pension payouts and public medical subsidies, expectations for more specific initiatives, particularly around childcare subsidies, were not fully met. The lack of concrete details on the latter raised concerns that some policies may fall short of delivering the stimulus needed for a significant economic turnaround.
Market reactions to the announced policies were cautiously optimistic. The consumer goods subsidy program, while expected to provide a temporary boost, may not be sufficient to overcome the broader economic challenges. Households are expected to remain cautious, particularly given the uncertain job market and the ongoing property sector downturn.
Despite these concerns, there are signs of optimism for China’s economic recovery. Breakthroughs in artificial intelligence and a rare meeting between President Xi and Chinese technology leaders have fueled market sentiment. However, the outlook remains clouded by the volatility of U.S. trade policy and the escalating competition between the two nations for technological dominance.
A Bloomberg survey of 77 analysts suggests that China’s economy will grow by only 4.5% in 2025, reflecting the difficulties the country’s policymakers face in reaching their growth target. The central bank is expected to further loosen monetary policy by reducing interest rates and lowering reserve requirements for banks, although recent efforts to defend the yuan against depreciation may limit the scope for such actions.
In an acknowledgment of the country’s ongoing deflationary pressures, the government has lowered its inflation target to 2% — the lowest level since 2003. This reduction in the inflation target underscores the difficulties China faces in stimulating demand, especially as consumer price growth has been almost flat over the past two years.
Despite these challenges, analysts view the report as a crucial step toward stabilizing the economy. Wee Khoon Chong, senior APAC market strategist for Bank of New York Mellon Corp., described the report as “positive and important” for maintaining economic stability, provided that the government successfully implements its measures. “Further credit and monetary easing should complement China’s fiscal strategy to help stabilize the economy,” Chong added.
As China moves forward with its ambitious growth target for 2025, much will depend on how effectively policymakers address both external challenges and internal weaknesses, including deflation and a sluggish property market. The coming months will reveal whether the government’s comprehensive fiscal and monetary measures can achieve the desired economic results.
Related topic:
Indian Stocks Near Record 10th Day of Decline Amid Foreign Selloff
U.S. Tariff Plans Fuel Ongoing Uncertainty for Business Executives
