China Sticks To 5% GDP Goal Despite Trade War And Economic Hurdles

China has reaffirmed its economic growth target for 2025 at “around 5%,” despite looming trade tensions with the United States and several domestic economic hurdles. Premier Li Qiang unveiled the target during the opening session of the National People’s Congress, China’s annual legislative conference, signaling the government’s commitment to stabilize growth rather than accelerate it under difficult circumstances.

Economic Outlook and Challenges

Chinese official data shows that the International Monetary Fund (IMF) projects a 4.6% GDP growth this year, slightly down from the 5% target set for 2024. The government report emphasized that the 5% target aligns with China’s mid- and long-term development goals and reflects a determined effort to confront current economic difficulties head-on. Key challenges include an ongoing real estate slump, sluggish consumer spending, and reduced private business investment, compounded by across-the-board tariffs imposed by the United States.

Stimulus Measures and Fiscal Policy

In response to the economic slowdown and external pressures, China is set to implement robust stimulus measures. The government plans to adopt a “more proactive fiscal policy,” increasing deficit spending from 3% to 4% of GDP. Additionally, the government will issue 1.3 trillion yuan (approximately $180 billion) in ultra-long-term bonds, up from 1 trillion yuan last year, to inject much-needed capital into the economy. These measures aim to support domestic demand and counteract the negative impacts of US tariffs on Chinese exports.

Shifting Economic Priorities

Beyond short-term stimulus, Chinese leadership is also focused on reducing the economy’s long-term dependence on the highly indebted real estate sector. President Xi Jinping is steering resources toward developing a more innovative, high-tech economy, particularly as restrictions on US technology exports force China to pursue greater self-reliance in key areas such as semiconductor production and other electronic components. Recent policy adjustments include consumer rebates for trading in old cars and appliances, as well as incentives for businesses upgrading their machinery.

Monetary Policy and Future Prospects

In a significant policy shift, the central bank announced it would move from a “prudent” to a “moderately loose” monetary policy for the first time in over a decade. This change is expected to further support economic growth, while the government prepares to borrow more funds and potentially increase social benefits like pensions and healthcare. The key question now is whether these concerted efforts will be sufficient to stabilize the economy and help China achieve its targeted 5% growth amid global uncertainties.