China Sets 2025 Growth Target at ‘Around 5%’ Amid Economic Challenges

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The Chinese government has set an annual economic growth target of “around 5%” for 2025, despite looming economic pressures, including heightened U.S. tariffs and sluggish domestic consumer spending.

Economic Strategy and Challenges

The target, announced at the annual meeting of China’s legislature, is the same as the past two years but may be harder to achieve due to increasing global trade tensions. The use of “around” allows flexibility if actual growth falls short.

Premier Li Qiang presented the growth target to the National People’s Congress, acknowledging challenges from both external pressures—such as rising unilateralism and protectionism—and internal weaknesses, including weak domestic demand and sluggish consumption.

The International Monetary Fund (IMF) forecasts China’s GDP growth at 4.6% in 2025, a slight decline from 5% in 2024 based on Chinese government statistics.

Government Focus on Domestic Demand

This year’s economic report places greater emphasis on boosting domestic consumption, shifting from previous years’ reliance on investment and exports. The ruling Communist Party signaled in December 2024 that it intends to make domestic demand the primary engine of economic growth.

The report notes that achieving the target will require “arduous efforts” amid a real estate slowdown and uncertain private investment climate. The latest 20% tariffs on Chinese goods imposed by U.S. President Donald Trump further pressure China’s exports, making domestic economic stimulation even more crucial.

Fiscal and Monetary Policy Adjustments

To support growth, China plans to implement a “more proactive fiscal policy”, including:

• Raising the budget deficit from 3% to 4% of GDP.
• Issuing 1.3 trillion yuan ($180 billion) in ultra-long-term bonds, up from 1 trillion yuan last year.
• Doubling support for consumer rebate programs, allocating 300 billion yuan to encourage trade-ins for new automobiles and appliances.

For the first time in over a decade, China’s central bank will shift its monetary policy stance from “prudent” to “moderately loose.”

Skepticism Over Economic Measures

Despite these initiatives, some analysts doubt they will be sufficient to prevent an economic slowdown. Economists note that China’s inflation target has been reduced from 3% to 2%, signaling persistent deflationary pressures.

“The degree of support is more modest than it may appear,” said Julian Evans-Pritchard of Capital Economics, suggesting the policies may not fully offset external headwinds and lack of stronger government spending on consumption.

Xi Jinping’s Long-Term Economic Vision

Chinese President Xi Jinping continues efforts to reduce the economy’s reliance on the debt-heavy real estate sector, prioritizing economic diversification and long-term sustainability over short-term stimulus.

As China navigates economic uncertainties, the government’s ability to balance growth with structural reforms will determine its success in maintaining stability amid global challenges.