China Maintains 5% Growth Target Amidst Trade War and Deflationary Pressures

China's Economic Growth Target Remains at 5% Amidst Trade War and Deflationary Pressures

China has decided to maintain its economic growth target for 2025 at roughly 5%, despite the ongoing trade war with the United States and persistent deflationary pressures. This decision was announced during the closing session of the National People's Congress (NPC) in Beijing.

The government plans to allocate more fiscal resources than in previous years to combat these challenges. This includes increasing the budget deficit to 4% of GDP and issuing 1.3 trillion yuan ($179 billion) in special treasury bonds. Local governments will also be allowed to issue 4.4 trillion yuan in special debt.

The government aims to stimulate domestic consumption through a "special action plan" and by expanding a consumer subsidy scheme for electric vehicles, appliances, and other goods. This is seen as crucial to mitigate the impact of the trade war and the sluggish property sector on the economy.

However, economists believe that more profound measures are needed to address China's long-term economic challenges. These include restructuring resource allocation, reforming the taxation system, and strengthening the social safety net.

Despite the government's efforts, the 5% growth rate achieved in 2024 was hardly felt at the street level. Many Chinese citizens are facing unstable jobs and incomes, while businesses are struggling to stay competitive in the face of rising costs and weak demand.

The trade war with the United States has further intensified these challenges. Chinese producers are facing higher tariffs and are being forced to seek alternative export markets, leading to concerns about price wars and protectionist measures in those markets.

While China has placed its future growth bets on "new productive forces" such as advanced manufacturing, experts believe that finding a balance between technological aspirations and consumer demand growth is crucial to avoid prolonged stagnation. Addressing fundamental imbalances in the economy remains a key challenge for China's future.