China's leadership unveiled an ambitious plan in 2025 in its 2025 economic growth plan and was backed by its largest fiscal deficit in three decades.
Beijing vows to make greater efforts to promote domestic consumption to avoid the negative impact of the escalating trade war with the United States. But there is great uncertainty as to whether this goal can be achieved at present.
Prime Minister Li Qiang warned in his speech at the opening ceremony of the Chinese Parliament’s annual meeting that “for a century, the invisible changes in the world are unfolding at a faster rate”.
“In areas such as trade, science and technology, the increasingly complex and severe external environment may have a greater impact on China,” Li said.
See also: Trump launches tariff war, China hits with 10-15% duty
this Trade war with US President Donald Trump administration At a time when the evacuation of the real estate sector continues to be stagnant household demand and debts bear the evacuation of the real estate sector, threatening China’s economic base (its massive industrial complex) is making the economy increasingly vulnerable.
Trump also hangs tariffs over a long list of countries, undermining the decades of global trade order that Beijing has established its economic model.
Stimulus measures focused on Chinese officials have eased deflationary pressures and reduced the world's second-largest economy's dependence on exports and growth investments.
According to analysts Guotai Junan, the term “consumption” was mentioned 31 times in Li’s report, up from 21 times last year, while “technology” received 28 mentions, slightly higher than 26 times in 2024.
“This is the first time that the increase in consumption has been raised to the top of the main tasks in 2025, thus replacing technology from its usual leading position,” said Tilly Zhang, technical analyst at Gringkal Dragonomics.
Zhang said: “This is not the key to the previous industrial policy, but the pursuit of a more balanced macroeconomic framework.”
But China said more than a decade ago that it hopes to turn to a more consumer-driven growth model without making significant progress towards that goal, and investors are not betting on this change in tone.
The CSI AI industry index rose 1.1%, while the Hang Seng Tech index climbed 3%. The consumer discretionary sector rose 0.6%.
DeepSeek's recent artificial intelligence platform has enhanced market sentiment in China this year.
Compared to 2024, there is more room for AI advancement in Li's speech this year and is expected to promote its applications in areas such as electric vehicles, smartphones and robots.
$179 billion in ultra-long bonds, more local governments
Lee told parliament about 2025 growth target of about 5% Larger budget deficits Media reports revealed in December that about 4% of the economy output was reported.
He said Beijing plans to issue 130,000 yuan (US$179 billion) on extra-long special fiscal bonds this year, up from 1 trillion yuan in 2024. Local governments will be allowed to issue 4.4 trillion yuan in special debts, up from 3.9 trillion yuan.
In addition, Beijing plans to raise 500 billion yuan to recapitalize major national banks.
Analysts say higher debt and expenditure data are designed to mitigate the impact of tariffs.
“If the growth momentum is hit by the trade dispute, we also hope that authorities will adjust their budgets in the middle of the year,” said Australian trader operations analysts.
Apart from the 300 billion yuan allocated to recently expanded consumer subsidy programs for electric vehicles, appliances and other commodities, Li's speech has little specific support for families.
“This is very successful in increasing spending on such commodities,” said Harry Murphy Cruise, head of economics in China and Australia at Moody's Analytics.
“But beyond that, spending is still very weak,” he added.
The benefit adjustment is nominal, with a minimum monthly pension ranging from 20 yuan to 143 yuan (US$20).
Economists have been urging Beijing to go beyond subsidies and strengthen its weak welfare system, while reimagining its tax, land and financial systems through deeper measures.
China's household spending is less than 40% of annual economic output, about 20 percentage points below the global average. By comparison, the investment is above 20 points.
Lee promised to address the supply and demand gap and implement fiscal reforms to improve local government revenue and stimulate household spending. Another government official said separately that the policies could be announced later this year.
Find alternative markets
Chinese producers are facing weak demand in the United States, selling more than $400 billion in goods in the United States, and they are also rushing to alternative export markets.
They fear that this will exacerbate price wars, squeeze profits, and increase the risks of politicians in these markets that will feel compelled to create higher trade barriers for Chinese goods to protect domestic industries.
So far, Washington has increased 20 percentage points on existing Chinese goods tariffs and implemented the latest 10-point increment on Tuesday, attracting revenge from Beijing.
“We worry that they will increase it by 10% and then increase it by 10%.” said Dave Fang, who makes his schoolbags in China, talking about teddy bears, stationery and consumer electronics. “This is a big problem.”
Last year, China's growth rate was 5%, with only the late stimulus reaching the fastest in the world, but it was hardly felt on the streets.
Although China operates a trillion-dollar annual trade surplus, many of its people complain about unstable jobs and incomes to remain competitive abroad as employers lower prices and business costs.
“Further expanding trade surplus is no longer a good strategy, so we need to rely on internal demand for growth,” said Andrew Xia, chief economist at Shanghai Capital Group.
- Jim Pollard's additional editor Reuters
See also:
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Chinese ships may face substantial fees to enter U.S. ports
US policy turbulent Asian chip giant with tenterhooks
Japanese automakers want government help deny U.S. tariffs
China needs technology self-reliance to avoid strangulation: xi
Xi Jinping sees attracting Trump to the new US – China trade deal
China sees more debt to deal with Trump's tariffs
