China Sets 2025 Economic Growth Target of 5% Amid Rising US Trade Tensions

In March 2025, during the annual session of the National People's Congress (NPC), Chinese Premier Li Qiang announced an economic growth target of approximately 5% for the year. This objective underscores China's commitment to sustaining economic momentum amid escalating trade tensions with the United States, which has imposed higher tariffs on Chinese exports.

To achieve this growth target, the Chinese government plans to increase its budget deficit to 4% of GDP, up from 3% in 2024. This marks the highest budget deficit target in recent decades, highlighting the economic challenges China faces. Additionally, the government intends to issue 1.3 trillion yuan in ultra-long-term special treasury bonds, an increase of 300 billion yuan over the previous year. These bonds are aimed at financing strategic projects and stimulating domestic demand.

The NPC, China's highest legislative body, convenes annually to set national policy and economic goals. Premier Li Qiang, who assumed office in March 2023, plays a central role in shaping and implementing the country's economic strategies.

In response to international trade tensions and technological competition, China is emphasizing technological self-reliance. The "Made in China 2025" initiative aims to upgrade the manufacturing sector by focusing on key technologies such as artificial intelligence, 5G, aerospace, semiconductors, electric vehicles, and biotechnology. This initiative has significantly reshaped both China's economy and global industrial policies. For instance, Chinese-made robots now rival German automation standards, reflecting the country's advancements in sectors like robotics, electric vehicles, and rail equipment.

The outlined economic policies have several implications:

• Domestic Consumption: By increasing fiscal spending and issuing bonds, the government aims to boost domestic consumption, which has been sluggish due to a property market slump and high government debt.

• Employment: The government aims to create over 12 million new urban jobs in 2025, aligning with the growth target and fiscal measures.

• Inflation Control: An inflation target of around 2% has been set, reflecting concerns over deflationary pressures.

China's approach to economic growth targets and fiscal measures has evolved over the years. The current 5% growth target and increased budget deficit are responses to both domestic economic challenges and external pressures, such as trade tensions with the United States. This strategy contrasts with previous years when China relied more heavily on export-driven growth and less on domestic consumption and technological self-reliance.

In summary, China's 2025 economic policies reflect a strategic approach to sustaining growth amid external challenges. By increasing fiscal spending, issuing special treasury bonds, and investing in technological self-reliance, the government aims to bolster domestic demand and counteract the impacts of escalating trade tensions with the United States.