China has set an ambitious economic growth target of about 5% for 2025 despite raising expectations for increased fiscal and monetary stimulus as the nation grapples with escalating trade tensions with the United States.
The announcement was made by Premier Li Qiang during the government’s annual work report to the National People’s Congress in Beijing on Wednesday.
The 5% growth target is coupled with a plan to expand the fiscal deficit to approximately 4% of the gross domestic product — the highest level in over three decades.
This move signals Beijing’s readiness to bolster the economy amid uncertainties posed by external pressures, including U.S. tariffs.
“It’s an ambitious growth target, and it means the authorities will still need to support growth,” said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group. “This number reflects authorities’ determination to support growth against the backdrop of external uncertainties and trade tensions with the US.”
The target suggests that Chinese policymakers are prepared to deploy substantial fiscal and monetary tools to stimulate demand and stabilize growth. In a significant move, the government unveiled plans to increase sales of special sovereign bonds by 1.3 trillion yuan ($179 billion).
About 300 billion yuan of the proceeds will be allocated to finance a subsidy program aimed at boosting consumer spending while the rest will support major infrastructure projects and modernization initiatives for businesses.
The offshore yuan reacted modestly to the announcement, trading 0.2% weaker against the dollar while China’s 10-year government bond yields slipped slightly to 1.75%. The Hang Seng China Enterprises Index initially gained as much as 2.5% before paring its gains, reflecting a cautious optimism among investors.
Li Qiang’s address also revealed the challenges the world’s second largest economy is facing, especially with the new tariffs imposed by President Donald Trump on Chinese imported goods.
The latest 10% levy threatens to curtail China’s export-driven growth, which accounted for nearly a third of its economic expansion last year.
Analysts, however, warned that if the U.S. moves forward with the proposed 60% tariffs, China will struggle to attain its projected growth target.
In a bid to counter deflationary pressures, the government has set a consumer price inflation target of around 2%, the lowest in over two decades.
This adjustment reflects concerns over weak domestic demand and a property market slump that shows little sign of abating.
The broad deficit target estimated to rise to 9.9% of GDP in 2025 is the highest on record.
President Xi Jinping’s administration faces the dual challenge of managing trade frictions with Washington while ensuring sufficient domestic economic momentum.
The broader fiscal strategy includes raising pension payouts and enhancing public subsidies for medical insurance, although details remain sparse.
Analysts caution that the consumer goods subsidy program may only offer a temporary boost to spending as households remain cautious amid an uncertain job market.
“This is positive and important as a growth-stabilizing factor,” said Wee Khoon Chong, senior APAC market strategist for Bank of New York Mellon Corp. “All that’s needed now is effective implementation of all measures announced.”
The growth target is also seen as a crucial factor for maintaining social stability, with each percentage point of GDP expansion estimated to create approximately 2.5 million new jobs.
