China has set an economic growth target of about 5% for 2025, raising expectations that officials in the Asian country will expand stimulus measures as the Asian country is now gradually entering a trade war with the United States.
Chinese Premier Li Qiang announced the mentioned target last Wednesday, March 5, as he delivered the government’s annual work report to the national parliament in Beijing. It is worth noting that for the third year in a row, the Asian country has set the same goal of gross domestic product (GDP) growth. In 2025, it will be difficult to make the mentioned expectations a reality.
China has buttressed its economic growth plan with the highest fiscal deficit target in the last three decades. Beijing has also promised to increase the issuance of local government bonds to a record level. It is worth noting that these actions of the Chinese authorities correspond to the preliminary expectations of the market. For the first time since the current head of the People’s Republic of China, Xi Jinping came to power more than a decade ago, top leaders have made increasing consumption a top priority in a work report.
Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group, said that this number reflects the determination of the Asian country’s authorities to support economic growth amid external uncertainty and trade tensions with the United States. The expert noted that Beijing has set an ambitious growth target. In this context, Raymond Yeung stated that it will still be necessary for authorities to support the upward dynamic of GDP.
Li Qiang outlined his blueprint for China’s economy to thousands of delegates of the National People’s Congress at the Great Hall of the People in Beijing. This happened shortly before the President of the United States Donald Trump touted Washington’s tariff policy as a way to make America rich again in his speech to Congress. The day before, Mr. Trump imposed another 10% levy on Chinese goods. It is worth noting that these trade policy measures are a direct threat to the export potential of the Asian country. For China, external shipments have been critically important lately. In this context, it is worth mentioning that exports accounted for almost a third of the Asian country’s economic growth in 2024. If Donald Trump ramps up to the 60% levy level, which he repeatedly mentioned during the election campaign last year, the Chinese economy, which is currently the second largest in the world, is most likely to face a significant slowdown in growth.
Beijing will certainly seek to activate internal factors of GDP increase, including by stimulating domestic consumption, but it is virtually impossible to completely avoid the sensitive consequences of a trade war with Washington. In this case, China should focus on minimizing as much as possible the negative implications of the economic confrontation with the United States, which is likely to affect other countries to a certain extent.
The optimistic Chinese GDP growth target is probably to require more aggressive stimulus measures from local policymakers. The Asian country is currently on track for its longest deflation since the 1960s amid weak in-home demand. China is also facing a protracted crisis in the real estate sector, which has become a factor of a negative impact on the world’s second-largest economy. At the same time, the property crash has yet to bottom out.
Li Qiang stated the target underscores China’s resolve to meet difficulties head-on and strive hard to deliver. He also noted that in setting the growth rate at around 5%, Beijing has taken into account the need to stabilize employment, prevent risks, and improve the people’s well-being.
As part of a measure to boost fiscal incentives, the Asian government has unveiled a plan to increase sales of special bonds to finance the growth of public spending in areas such as infrastructure that are not counted towards the headline budget deficit.
A broad measure of government deficit target reached 9.9% of GDP in 2025. This indicator is a record high.
The Chinese authorities will sell special sovereign bonds worth 1.3 trillion yuan ($179 billion) and use 300 billion yuan of the proceedings to finance a program to subsidize purchases of consumer goods by the public. The rest of the money will be used to build major infrastructure projects and encourage businesses to upgrade their equipment.
As we have reported earlier, China Hits US Agriculture Amid Tariff Confrontation.
