China has set a growth target of around 5% for 2025, signaling its intention to implement more stimulus measures to counter external uncertainties, including ongoing trade tensions with the United States. Premier Li Qiang outlined the target in his government’s annual work report delivered to the National People’s Congress in Beijing on Wednesday. This marks the third consecutive year China has maintained a 5% growth target, though meeting it again is expected to be challenging.
In addition to the GDP target, the government has set its fiscal deficit at approximately 4% of GDP—the highest level in over three decades—indicating that Beijing is prepared to take aggressive steps to stimulate the economy. Both the GDP and budget deficit goals align with economists’ expectations ahead of the session.
“This ambitious growth target shows that the authorities are committed to supporting economic growth despite external challenges,” said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group. “It reflects the determination to stabilize the economy amidst the ongoing trade dispute with the U.S.”
As Premier Li delivered his address, the offshore yuan weakened by 0.2% against the dollar, and China’s 10-year government bond yields slipped by one basis point to 1.75%. The central bank has opted to keep the currency steady, avoiding significant depreciation to mitigate the impact of higher U.S. tariffs.
The announcement comes just one day after U.S. President Donald Trump imposed another 10% tariff on Chinese goods, heightening concerns that export-driven growth could be further stifled. China is also grappling with deflationary pressures and an ongoing property market downturn, both of which add to the economic challenges.
To meet President Xi Jinping’s target of transforming China into a “medium-developed country” by 2035—implying a doubling of the economy’s size from 2020 levels—China needs steady economic growth. A 5% GDP expansion is seen as crucial for sustaining employment and social stability. Each percentage point of GDP growth is estimated to create approximately 2.5 million new jobs, and with over 12 million graduates expected to enter the job market in 2025, maintaining this growth rate is vital.
“We have set the growth target at around 5% to stabilize employment, manage risks, and improve the people’s well-being,” Premier Li said. He added that the central bank would consider cutting interest rates and reserve requirements at an appropriate time, supporting the government’s “moderately loose” monetary policy.
The government’s fiscal and monetary measures, coupled with higher public spending, are expected to be key components of the stimulus. Economists predict that fiscal spending will target weak consumer demand, with a particular focus on boosting domestic consumption.
Vey-Sern Ling, managing director at Union Bancaire Privee, emphasized that China’s willingness to back its economy with substantial support should reassure markets. “This is a positive signal that China is determined to stabilize growth and prevent economic decline,” he said.
While there are signs of improvement, such as breakthroughs in artificial intelligence and a meeting between President Xi and domestic tech leaders, analysts remain cautious. A Bloomberg survey of 77 analysts forecasts that China’s economy will grow by only 4.5% in 2025, highlighting the challenge of meeting the official target.
The government has also set its consumer price index (CPI) target for 2025 at around 2%, the lowest since 2003, in recognition of the deflationary pressures. With inflation barely reaching 0.2% over the past two years, some economists are calling for the government to make the CPI target a binding policy.
Premier Li acknowledged the difficulties ahead in meeting these ambitious targets. “Achieving this year’s targets will not be easy, and we must make arduous efforts to meet them,” he said. The government’s plans for fiscal and monetary stimulus could have significant implications for global commodity prices and inflation, with analysts expecting further easing measures to complement China’s fiscal strategy.
“We expect continued credit and monetary easing to support the fiscal strategy and stabilize growth,” said Wee Khoon Chong, senior APAC market strategist at Bank of New York Mellon Corp.
Related topics:
USD/CAD Continues Uptrend Toward 1.4450 Amid Tariff Announcements and Oil Price Decline
Australian Dollar Faces Continued Pressure Amid US Tariff Threats and Economic Data
NZD/USD Faces Selling Pressure Below 0.5650 Amid Tariff Concerns
