In a bold declaration amidst escalating trade tensions with the United States, China’s Premier Li Qiang announced a target growth rate of “around 5%” for 2025 during his report at the National People’s Congress, an event that showcases the government’s priorities and ambitions. This target was revealed as the backdrop of a split-screen moment with US President Donald Trump delivering his first address to Congress in his second term. Both leaders outlined their contrasting visions for strengthening their nations within a competitive global economy.
Li’s speech emphasized the perseverance of the Chinese government and its citizens under the leadership of Xi Jinping, stating that the challenges presented by increasing American tariffs would be met with resolve. As the world’s second-largest economy, China’s growth target is now under pressure from Trump’s ongoing trade war, which has seen tariffs on all Chinese imports raised to 20%.
In response to these aggressive economic measures, China has enacted several counteractive measures including retaliatory tariffs up to 15% on selected US goods, expanding export controls, and even taking actions such as suspending imports from specific American companies. Furthermore, Chinese officials issued a warning that they would confront any form of economic warfare from the US, vowing to push back strategically against what they perceive as aggressive trade policies.
Despite this resilient rhetoric, the reality of a slowing Chinese economy, compounded by domestic issues such as sluggish consumption, high youth unemployment, and a real estate crisis, looms large over these ambitious growth plans. Premier Li acknowledged these economic trials, noting the increasingly complex external environment and the potential adverse effects on trade and technology sectors.
Significantly, China has raised its budget deficit to approximately 4% of its gross domestic product, the highest in decades, a move targeting increased spending to mitigate the fallout from US tariffs. Furthermore, the inflation target has been adjusted downwards from 3% to around 2%, demonstrating the urgency of addressing deflationary pressures.
Li also reaffirmed China’s commitment to becoming a technological powerhouse, promising to support industries such as AI, quantum technology, and bio-manufacturing with increased funding for science and technology. The government’s budget for these efforts has been set at 398 billion yuan ($54.7 billion) for 2025, reflecting a 10% increase from 2024.
However, experts warn that the fallout from Trump’s trade war may lead to significant challenges for low-end manufacturing in China, where profit margins are already under pressure. Many experts fear that continued tariff hikes could accelerate the relocation of factories to countries with lower labor costs, posing longer-term risks to China’s economic stability.
Additionally, China’s military budget for 2025 was announced at a 7.2% increase, underlining that while trade tensions rise, military spending remains a national priority. This year, the growth of China’s defense spending has not reached double digits for the first time since 2015, signaling a strategic approach to military expenditures under current geopolitical tensions.
In conclusion, as both nations navigate the complexities of ongoing trade disputes, the implications will resonate through their economies and influence global market dynamics.