Beijing set its goal for economic growth at 5% for 2025, ignoring the increasing threats of the trade war with the United States, according to what Chinese Prime Minister Lee Qiang announced during the opening session of the National Popular Conference.
This ambitious goal comes in light of a more strict American trade policy led by President Donald Trump, who recently imposed additional customs duties on Chinese imports, which increases the challenges faced by the second largest economy in the world.
Increased deficit and government spending
According to Reuters, the Chinese government decided to raise the deficit in its budget to 4% of GDP, compared to 3% in 2024, the highest level in more than 30 years. Beijing plans to issue 1.3 trillion yuan ($ 179 billion) of private treasury bonds this year, compared to trillion yuan ($ 138 billion) in 2024, in addition to allowing local governments to issue 4.4 trillion yuan (606 billion dollars) of private debts, compared to 3.9 trillion yuan ($ 537 billion) last year.
Governmental measures include allocating 300 billion yuan ($ 41 billion) to support consumers in the purchase of electric cars and home appliances, 500 billion yuan (69 billion dollars) for re -financing of government banks, and 200 billion yuan (28 billion dollars) to update manufacturing equipment.
Military expansion continues
According to the German News Agency, China intends to increase its military spending by 7.2% this year, the same rate as it recorded in 2024, bringing the defense budget to 1.78 trillion yuan (245 billion dollars). This increase comes amid the ongoing tensions in the southern Sea of China, in addition to the escalation of tension with Taiwan, which Beijing considers part of its territory despite its independent administration since 1949.
Confronting the American escalation
Commercial tensions between China and the United States are shadow on the Chinese economy, as the Donald Trump administration imposed additional customs duties by 10% on Tuesday, raising the total fees imposed on Chinese goods to 20%. In response, Beijing announced an increase of between 10% and 15% on a group of American imports, including wheat, corn, soy and chicken, and imposed restrictions on 25 American companies, according to Reuters.
The American Bloomberg Agency reported that Chinese officials realize that these fees may affect $ 400 billion of annual exports to the United States, which prompted them to direct Chinese products towards alternative markets, despite fears of price wars with other countries that may impose commercial barriers to protect their local industries.
Promote domestic demand as an economic priority
According to the government report issued by the National People’s Congress, which was conveyed by Bloomberg, the major economic priority for this year will be to enhance local consumption to become the “main driver of economic growth” in light of the decline in the demand of Chinese families and the challenges facing the real estate sector. “We will be treated as soon as possible, twice the domestic demand, especially the consumption of families, to ensure that this demand becomes the cornerstone of the Chinese economy,” Lee Qiang said.
In another step to support the demand, the government is planning to continue the policies of cash facilitation, including reducing interest rates and bank cash reserve requirements “in time”, according to Lee Qiang’s statements conveyed by Bloomberg.
Incentive procedures are insufficient?
Despite these measures, a survey conducted by Bloomberg showed that 77 economic experts expect the Chinese economy to grow only by 4.5% in 2025, less than the declared goal.
Analysts attribute this slowdown to the continuing trade pressure, poor local demand, and the slowdown in the real estate sector, which has not yet reached the bottom of its crisis.
“This number reflects the design of the authorities to support growth in the face of external tensions and economic uncertainty,” said Raymond Young, the Australian chief economist at ANZ, said.
Analysts at Goldman Sachs indicated that the motivational policies announced by the government may not be sufficient to compensate for the negative impact of American customs duties, especially if Trump decides to raise the fees to 60% as it hinted during his campaign.
While China is fighting to maintain its economic momentum, attention is directed to the government’s ability to implement its motivational plans, especially in the face of internal and external challenges.
