China sets its GDP growth target at 5% for 2025, unchanged from last year, despite rising risks of trade tariffs.
China set the economic growth target at 5% for 2025 at its annual government meeting, while unleashing more stimulus measures to bolster the economy as trade tensions with the United States escalate.
Increasing deficit level and lowering inflation target
In the Government Work Report, Beijing has raised its budget deficit level to 4% of Gross Domestic Product (GDP), the highest in three decades, aligning with the “highly proactive” fiscal policy stance previously announced in January. Furthermore, officials have lowered the country’s inflation target to 2% from 3% in 2024, which is the lowest in more than two decades in an acknowledgment of sluggish domestic demand.
The government annual meeting also called The Two Sessions, refers to the concurrent annual meetings of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC) and the National People’s Congress (NPC), which are expected to conclude on 11 March.
More stimulus measures
The government work report has outlined plans for more stimulus measures including the issuance of 4.4 trillion yuan (€570 billion) in special-purpose bonds, particularly used to finance infrastructure projects, 1.3 trillion Yuan (€168 billion) ultra-long special Treasury bonds, and 500 billion Yuan (€65 billion) in special sovereign bonds to support the country’s largest commercial banks.
The report also includes policies to bolster domestic consumption, support the artificial intelligence (AI) industry, and help renewable energy projects. Premier Li Qiang acknowledges the risks arising from Trump’s tariffs, emphasising the need to boost domestic demands. China will boost cross-border e-commerce to push for more exports, pledging implementation of supporting policies.
US-China trade war widens
US President Donald Trump imposed 10% tariffs on Chinese goods last month and doubled the amount to 20% on Tuesday. In retaliation, China announced 15% import duties on US agricultural product imports, including chicken, wheat, corn, and cotton, along with 10% levies on other food imports, such as soy, port, beef, fruits, and vegetables, which will come into effect on 10 March. This follows China’s first set of retaliatory tariffs on US liquified natural gas, crude oil, farm equipment, and certain vehicles in February.
A widening trade war between the US and China, alongside tariffs imposed on Mexico and Canada, weighed on investment sentiment, sending global stock markets sharply down on Tuesday. Trump acknowledged that his aggressive tariff plans caused “a little disturbance” before addressing a joint session of Congress on Tuesday night, “but we’re okay with that,” he said.
Chinese stock markets rise, copper higher
Chinese stock markets snapped a four-day losing streak, with the Hang Seng Index up nearly 2% at 6:45 am CET on Wednesday, while all three mainland benchmarks were also higher. The Chinese Yuan was slightly down against the US dollar after a surge in the previous day.
In commodities, copper’s futures jumped 1.6% following Beijing’s additional stimulus policies aimed at supporting infrastructure and AI projects. China is the world’s biggest importer of copper, which is widely used in manufacturing, electric vehicles, and AI development.
However, crude oil prices continued to side toward year-low levels during Wednesday’s Asian session, despite China’s remarks, due to OPEC+’s decisions to bring forward its plan to hike supply.
by Tina Teng
Credits: euronews.com