China Aims for 5% Growth Target Amid US Tariff Challenges: What It Means for the Global Economy

China aims for a GDP growth of about 5% for 2025, despite facing economic challenges and trade tensions with the U.S. This target matches their goals from the previous two years and was shared in the government’s annual work report, which outlines achievements and objectives.

The 5% growth goal shows China’s commitment to maintaining economic stability, even as the U.S. has recently imposed new tariffs. However, some experts believe the government’s planned spending is not enough to boost the economy significantly, especially with ongoing issues in the property sector affecting consumer spending.

Premier Li Qiang presented the report in Beijing during the National People’s Congress, which is China’s legislative body. He emphasized that this growth target is crucial for job stability, risk management, and overall well-being. Following the report, the Hang Seng China Enterprises index rose by 2.6%, indicating positive market reactions.

In his address, Li set a budget deficit target of 4% of GDP, up from 3% in previous years, the highest in decades. The government plans a more proactive fiscal policy to stimulate growth. According to Harry Murphy Cruise from Moody’s, high deficit signals the challenges the economy faces.

Investment director Xin-Yao Ng from Aberdeen noted that while the government is eager to support the economy, effective allocation of funds is essential. The report also aims for inflation at 2%, a drop from 3%, signaling deflationary pressures in the economy.

Eswar Prasad, a Cornell economist, remarked that the growth target seems more aspirational than achievable without targeted policies and reforms to enhance productivity.

Specific fiscal measures announced were less robust than anticipated. For instance, the government allocated Rmb300 billion (about $40 billion) in consumer goods subsidies. Furthermore, there will be Rmb4.4 trillion in special local government bonds and Rmb1.3 trillion in central government bonds for infrastructure investments, but these amounts were below expectations, according to Goldman Sachs economist Hui Shan.

The U.S. has increased tariffs by 20% on Chinese goods, leading to retaliatory measures from China, including targeting U.S. agricultural and energy sectors.

Additionally, China plans to raise its defense budget by 7.2% to Rmb1.78 trillion, consistent with spending growth trends of the past decade. Analysts argue that the actual military budget may be significantly higher than reported. MIT’s Taylor Fravel pointed out that expanding the military’s capabilities will come with long-term costs.

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