China set its economic growth target at “around 5%” for 2025, the same as last year and in line with market expectations. But reaching it may be difficult amid an escalating trade war with the U.S. and anemic consumption at home.
Chinese Premier Li Qiang announced the gross domestic product (GDP) growth target on Wednesday in the Great Hall of the People in Beijing. Thousands of delegates are gathering this week in the Chinese capital for the National People’s Congress, the country’s top legislative meeting, including government officials and business heavyweights.
The 2025 target underscores China’s determination to face difficulties and tackle challenges, Li said while delivering the annual “work report” from the government. The fiscal deficit was set at 4% of GDP, up from 3% in 2024, which suggests increased government borrowing and spending. The policy focus will be on boosting domestic consumption and improving people’s livelihoods, according to Li.
But this year’s growth target will not be “easily achievable,” Alicia Garcia Herrero, a Hong Kong-based chief Asia Pacific economist for French investment bank Natixis, says by WeChat. Exports, a pillar of economic growth, will be pressured by a tit-for-tat trade war with the Donald Trump administration.
Just one day before Li’s speech, the U.S. doubled tariffs on all Chinese imports to 20% from 10%. Officials in Beijing retaliated with up to 15% additional tariffs on certain U.S. goods such as chicken and wheat.
China is likely to absorb part of the increased U.S. duties by lowering prices of certain locally produced goods, Herrero predicts. This is shown in this year’s lowered consumer price inflation target of around 2%—a change from the longstanding 3% annual inflation goal.
As the trade war escalates, officials want to boost growth through domestic stimulation measures such as cutting interest rates and banks’ reserve requirements, which will help push more money into the broader economy, according to Li’s report. He also pledged to support the development of the property market, as a prolonged real estate downturn has been squeezing household wealth and curbing spending.
Chinese officials haven’t announced more detailed measures yet. Investors are also wondering how Beijing will be supporting the development of artificial intelligence (AI) to boost growth, Charu Chanana, Singapore-based chief investment strategist at Saxo Bank, says by email.
“A focus on private innovation could further lend a boost, as this will be a turnaround from China’s recent SOE [state-owned enterprises] focus,” she says.
In February, President Xi Jinping met the country’s top private-sector tycoons including Alibaba cofounder Jack Ma, meant to send a signal of support for them. But economic growth could slow to around 4.2% this year, Harry Murphy Cruise, a Canberra, Australia-based economist at research firm Moody’s Analytics, wrote in a March 3 note published before Li’s speech. In the note, he predicted the same growth target as last year.
“That’s a tough goal,” he wrote. “China’s economy is being squeezed on all sides. U.S. tariffs will smash exports, and subdued household spending and a falling property market will hold back the domestic economy.”
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