An aerial view of a new city district in southern China’s Nanning city on Feb. 28, 2025.
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China on Wednesday set its GDP growth target for 2025 at “around 5%” and laid out stimulus measures to boost its economy amid escalating trade tensions with the U.S.
Beijing raised its budget deficit target to “around 4%” of GDP from 3% last year, according to the official report, as the country’s top legislative body held its annual meeting.
The 4% deficit would mark the highest on record going back to 2010, according to data accessed via Wind Information. The prior high was 3.6% in 2020, the data showed.
The government report outlined plans to issue 1.3 trillion yuan ($178.9 billion) in ultra-long-term special treasury bonds in 2025, 300 billion yuan more than last year. Another 500 billion yuan worth of special treasury bonds will be issued to support large state-owned commercial banks.
The widened fiscal package also includes the issuance of 4.4 trillion yuan of local government special-purpose bonds this year to help ease their financing strains.
In an implicit acknowledgement of sluggish domestic demand, Beijing revised down its annual consumer price inflation target to “around 2%” — the lowest in more than two decades — from 3% or higher in prior years, according to the Asia Society Policy Institute.
The new inflation goal would act more as a ceiling than a target to be realized. Consumer prices climbed just 0.2% in 2024 and 2023, while producer prices have declined for over two years.
While emphasizing boosting domestic consumption as a top priority, Beijing vowed to expand the consumer goods trade-in program with an additional 300 billion yuan in ultra long special treasury bonds.
China seeks to keep the urban unemployment rate, which stood at 5.1% last year, at around 5.5% and add more than 12 million jobs in urban areas.
The country’s annual parliamentary gathering, known as the “Two Sessions,” started Tuesday with the opening ceremony of the Chinese People’s Political Consultative Conference — a top advisory body.
The National People’s Congress kicked off its meeting Wednesday and is expected to wrap up its annual session on March 11. The foreign minister and heads of several economic departments are due to hold press conferences in the interim.
Chinese offshore yuan slipped to 7.264 against the U.S. dollar as Chinese Premier Li Qiang presented the work report at the National People’s Congress meeting in a live-streamed session. The benchmark CSI 300 index was little moved.
The exchange rate will be kept “generally stable at an adaptive, balanced level,” he said.
Yields on the 10-year government bonds fell slightly as the leadership vowed to “make timely cuts” to interest rates as well as the required reserve ratios, which determine the amount of cash that banks must hold. Chinese offshore yuan depreciated to 7.2640 against the U.S. dollar.
The opening of China’s National People’s Congress coincides with U.S. President Donald Trump’s planned speech at a joint session of Congress, where Trump could share his agenda and goals for the year.
On the issue of Taiwan, Beijing stressed it would “resolutely oppose separatist activities” aimed at the democratically governed island’s independence, while promoting a “peaceful development of cross-Strait relations.”
Tit-for-tat tariffs
This year’s parliamentary meetings come as Trump has imposed fresh tariffs on Chinese goods — an additional 20% in duties in just about a month.
Beijing on Tuesday responded with additional tariffs of up to 15% on some U.S. goods from March 10, and restrictions on exports to 15 U.S. companies. China also added 10 U.S. firms to an unreliable entities list that could limit their ability to do business in the Asian country. Many of the named U.S. businesses work in aerospace, defense or with drones.
“We hope to work with the U. S. side to address each other’s concerns through dialogue and consultation on the basis of mutual respect, equality, reciprocity, and mutual betterment,” Lou Qinjian, spokesperson for the third session of the 14th National People’s Congress, told reporters Tuesday morning.
“At the same time, we never accept any act of pressuring or threatening, and will firmly defend our sovereignty, security, and development interests,” he said in Mandarin, via an official translation.
Stimulus and tech
The increased U.S. duties will weigh on China’s exports, a rare bright spot in an economy struggling with lackluster domestic demand.
While the world’s second-largest economy grew by 5% in 2024, retail sales growth fell sharply to 3.4% from 7.1% in 2023. The real estate drag persisted, with investments in the sector dropping by 10.6% last year, from the a year earlier.
Investors have closely watched Beijing’s efforts to address the country’s economic slowdown after an unexpected, high-level pledge of support in September prompted a stock rally. Market gains picked up again after Chinese President Xi Jinping held a rare meeting last month with entrepreneurs including Alibaba’s Jack Ma and artificial intelligence startup DeepSeek’s Liang Wenfeng.
“There is no denying that AI technologies are accompanied by some unknown risks and challenges and will bring new tasks in areas like security, social governance, morality, and ethics. … It will inevitably have an impact on production,” Lou said.
“China … is opposed to over-stretching the concept of national security or politicizing economic and technological issues,” he said.
While lacking the specifics, the leadership reiterated on Wednesday it would work to support the private sector. The NPC members will carefully revise and improve a draft for the private economy promotion law, Lou said Tuesday.
— CNBC’s Bernice Ooi contributed to this report.