China ramps up stimulus to guard economy from changes ‘unseen in a century’, boosting stock markets

A New Era of Economic Strategy: China’s Response to Global Challenges

China’s economy is at a crossroads as it navigates a complex web of global challenges, shifting economic priorities, and the ongoing trade war with the United States. On March 5, Premier Li Qiang delivered a pivotal speech at the opening of China’s annual parliamentary meeting, outlining a clear roadmap to bolster the nation’s economic resilience. The central theme of the address was the need for greater fiscal stimulus, particularly in supporting consumption and mitigating the impact of escalating trade tensions. With a growth target of around 5% for the year, Beijing is determined to keep its economic engine running smoothly, even as the global landscape becomes increasingly unpredictable.

The Shifting Global Economic Landscape

Premier Li Qiang painted a picture of a world in rapid flux, warning that "changes unseen in a century are unfolding at a faster pace." The external environment, he noted, is growing more complex and severe, with potential impacts on trade, science, and technology. These challenges are particularly acute for China, which has long relied on exports and investment to drive its economic growth. The trade war with the U.S. has added another layer of complexity, threatening to disrupt China’s sprawling industrial complex. At the same time, domestic issues such as sluggish household demand and the unraveling of the debt-laden property sector are making the economy increasingly vulnerable.

The Trade War and Its Ripple Effects

The U.S.-China trade war, initiated by the Trump administration, has sent shockwaves through the global economy. President Trump’s tariffs have targeted not just China but a long list of countries, disrupting a decades-old global trade order that Beijing has relied on to fuel its economic rise. For China, the stakes are high. Its industrial sector, once a powerhouse of growth, is now facing significant pressure. At the same time, the trade war has accelerated the need for China to reduce its reliance on exports and investment for growth. This has led officials to focus on stimulating domestic consumption, a strategy seen as key to navigating the current economic challenges.

A New Focus on Consumption and Technology

In a significant shift in policy, Premier Li Qiang’s speech elevated "consumption" to the top of the list of major tasks for 2025, surpassing "technology," which had previously held the leading position. According to analysts at Guotai Junan, the term "consumption" was mentioned 31 times in Li’s report, up from 21 times last year. While "technology" still received 28 mentions, slightly up from 26 in 2024, the emphasis on consumption marks a strategic pivot. As Tilly Zhang, a technology analyst at Gavekal Dragonomics, noted, this shift is not a complete departure from previous industrial policies but rather a move toward a more balanced macroeconomic framework. By prioritizing consumption, China aims to reduce deflationary pressures and create a more sustainable growth model.

Supporting Small Businesses and Innovation

To achieve these goals, China is also focusing on supporting small and medium-sized enterprises (SMEs) and fostering innovation. SMEs are the backbone of China’s economy, employing millions of people and driving innovation. However, they have faced increasing challenges in recent years, including tight credit conditions and rising costs. By providing targeted support to SMEs, China hopes to create a more dynamic and resilient economic environment. At the same time, the emphasis on technology reflects the government’s recognition of the need to drive long-term growth through innovation. Whether it’s in areas like artificial intelligence, renewable energy, or advanced manufacturing, China is betting on technology to secure its place as a global economic leader.

The Road Ahead: Navigating Uncertainty and Securing Growth

As China charts its course through these uncertain times, the government is pulling out all the stops to ensure economic stability. From boosting consumption to supporting SMEs and investing in technology, Beijing is taking a multifaceted approach to address the challenges posed by the global trade war and domestic economic pressures. While the road ahead is fraught with uncertainty, China’s determination to grow by around 5% this year underscores its commitment to maintaining economic momentum. By balancing short-term stimulus measures with long-term strategic investments, China is laying the groundwork for a more sustainable and resilient economy. The coming months will be crucial in determining whether these efforts will pay off, but one thing is clear: China is ready to face the future with a renewed sense of purpose and determination.