(Bloomberg) — China set a forceful economic growth goal at about 5% for 2025, raising expectations for officials to unleash more stimulus later this year as they confront a trade war with Donald Trump.
Premier Li Qiang announced the target Wednesday morning as he delivered the government’s annual work report to the national parliament in Beijing. This marks the third straight year has China maintained that goal, but repeating it again will be difficult.
China buttressed its growth plan with the highest fiscal deficit target in over three decades and a pledge to raise local government bond issuance to record levels. Top leaders made boosting consumption the work report’s top priority for the first time since President Xi Jinping came to power over a decade ago.
“This number reflects authorities are determined to support growth against the backdrop of external uncertainties and trade tensions with the US,” said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group. “It’s an ambitious growth target, and it means the authorities will still need to support growth.”
Li outlined his blueprint for China’s economy to thousands of delegates of the National People’s Congress at the Great Hall of the People in Beijing, shortly before Trump touted his tariff policy as a way to make “America rich again” in an address to Congress.
Just a day earlier, the US leader imposed another 10% levy on China, threatening to cripple the export engine that last year contributed to almost a third of economic expansion. If Trump ramps up to the 60% levy level he floated on the campaign trail, it could knock off a significant portion of growth for the world’s second-largest economy this year.
As Li spoke, the offshore yuan traded 0.2% weaker against the dollar, while China’s 10-year government bond yields slipped one basis point to 1.75%. The Hang Seng China Enterprises Index gained as much as 2.5% in early trading before paring that move. The CSI 300 Index, the mainland’s equity benchmark, traded 0.1% lower after eking out small gains earlier.
Xi’s bullish growth goal will likely require his lieutenants to roll out more aggressive stimulus, as policymakers also contend with domestic challenges. The nation is on track to record its longest streak of deflation since the 1960s as a result of weak demand, while the property crash has yet to bottom out.
The target “underscores our resolve to meet difficulties head-on and strive hard to deliver,” said Li. “In setting the growth rate at around 5%, we have taken into account the need to stabilize employment, prevent risks, and improve the people’s wellbeing.”
What Bloomberg Economics Says…
“China’s resolve to keep growth going is loud and clear, with policymakers planning a record budget deficit and setting targets for 5% GDP expansion and 2% CPI inflation in 2025 — goals that will require considerable policy support to achieve. The macro objectives are also coupled with additional capital for banks and continued debt relief for local governments, which should help to improve policy traction.”
— Chang Shu, Eric Zhu and David Qu, economist. For full analysis, click here
In a step to boost fiscal stimulus, the government unveiled a plan to increase its sales of special bonds to fund greater public spending in areas including infrastructure, which aren’t counted toward the headline budget deficit.
A broad measure of government deficit target reached 9.9% of GDP in 2025, the highest on record, based on Bloomberg calculations of official figures.
Authorities will sell 1.3 trillion yuan ($179 billion) worth of special sovereign bonds and use 300 billion yuan of the proceeds to finance a subsidy program for residents’ purchases of consumer goods, doubling its size in 2024. The rest of the money will go toward building major infrastructure projects and encouraging businesses to upgrade their equipment.
Li pledged the focus of economic policies will shift to benefiting people’s lives and boosting consumption. The word “consumption” was mentioned 27 times throughout the document, the most in at least a decade. In contrast, “high-quality development,” a slogan representing Xi’s push to boost high-tech manufacturing, was mentioned much less frequently than last year.
While Li listed a few steps to improve social welfare, including raising pension payout levels and the public subsidy for medical insurance, he only made a broad pledge to hand out childcare subsidies, disappointing those who expected a price tag to be unveiled. The pension increase is the same as China enacted last year.
Those measures will likely leave markets wanting more. The consumer goods subsidy program is expected to give only a temporary boost to spending, as households remain cautious and prone to save more in the face of an uncertain job market.
Supporting Economy
There are recent signs pointing to an improving outlook for the economy. DeepSeek’s recent breakthrough in artificial intelligence boosted market sentiment, as did a rare meeting between Xi and homegrown technology champions.
But the question now is how long the momentum will last in the face of Trump’s unpredictable tariff announcements and the intensifying competition between China and the US for tech supremacy. A Bloomberg survey on 77 analysts forecast the Chinese economy will only grow 4.5% in 2025, reflecting the challenge facing officials.
The central bank will cut interest rates and the amount of cash lenders must set aside in reserves “at an appropriate time,” Li said. That implies monetary policy will still be loosened to stimulate demand, even though a focus on defending the yuan against depreciation pressure has limited easing moves recently.
In a tacit recognition of deflationary pressures, the government lowered its official target for consumer price increase to around 2%, the lowest since 2003.
While that goal was largely regarded as a ceiling in the past, trimming it shows officials have conceded faster price growth will be a challenge after consumer inflation reached only 0.2% for the past two years.
Overall, the report will be seen as “positive and important as a growth stabilizing factor,” Wee Khoon Chong, senior APAC market strategist for Bank of New York Mellon Corp.
“All that’s needed now is effective implementation of all measures announced. We expect further credit and monetary easing to complement China fiscal strategy,” Wee added.
–With assistance from Wenjin Lv, Abhishek Vishnoi, Fran Wang, Betty Hou and Winnie Hsu.
(Updates with more details throughout.)
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