China has set an ambitious growth target of around 5 per cent of GDP for 2025 despite the threat of an escalating trade war with the United States and a stubbornly sluggish domestic economy.
The target remains unchanged from 2024 but premier Li Qiang acknowledged the headwinds facing the Chinese economy and promised an action plan to boost consumption.
Mr Li, who is the most senior figure in the Chinese leadership after Xi Jinping, announced the target during his annual report on the government’s work to the country’s top legislative body. Mr Xi was present in the Great Hall of the People in Beijing’s Tiananmen Square as Mr Li spoke at the start of annual, week-long session of the National People’s Congress (NPC).
“Domestically, the foundation for China’s sustained economic recovery and growth is not strong enough. Effective demand is weak, and consumption, in particular, is sluggish. Some enterprises face difficulties in production and operations, and overdue payments remain a prominent issue for enterprises. There are pressures on job creation and income growth,” Mr Li said.
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He said the government would issue RMB1.3 trillion (€168 billion) in ultra-long bonds, up from RMB1 trillion in 2024, part of which would be used to fund the expansion of a scheme that subsidises the trade-in of household appliances and electric vehicles. Indebted local governments will be allowed to issue up to RMB4.4 trillion in special purpose bonds to fund infrastructure and development projects.
The government raised its fiscal deficit target to 4 per cent of GDP from 3 per cent last year but it lowered its consumer price inflation target to 2 per cent from 3 per cent. The 2025 inflation target is the lowest for more than two decades but it comes as China teeters on the edge of deflation with consumer prices rising by just 0.2 per cent in 2024.
“We should move faster to address inadequate domestic demand, particularly insufficient consumption, and make domestic demand the main engine and anchor of economic growth,” Mr Li said.
“We will adopt special measures to increase spending power, boost the supply of quality products and services, and improve the consumption environment in order to tap the potential of diversified, differentiated spending and promote consumption upgrading. We will promote personal income growth through a variety of avenues, increase the earnings of low- and middle-income groups and reduce their financial burdens, and improve the mechanisms for regular pay increases.”
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US president Donald Trump has imposed a 20 per cent tariff on all Chinese imports since he came into office in January, with the latest increase coming this week. In response, China on Tuesday put a 10-15 per cent tariff on some US food and agricultural products and imposed export and investment restrictions on 25 American companies.
Despite trade tensions with the US and other economic partners, including the European Union, Mr Li said that China wanted to open up further to foreign investment, which has been in sharp decline in recent years. He said an “increasingly complex and severe external environment” could have a big impact on China in areas such as trade, science, and technology.
“Global economic growth lacks steam, unilateralism and protectionism are on the rise, the multilateral trading system is experiencing disruptions, and tariff barriers continue to increase,” he said.
“All this is undermining the stability of global industrial and supply chains and impeding flows in the international economy. The factors causing geopolitical tensions remain numerous, and they are affecting global market expectations and investment confidence and fuelling the risk of volatility in global markets.”
