China sets GDP growth target of ‘around 5%’ for third year running, despite worsening trade war

China’s Economic Growth Target for 2025: Balancing Ambition and Caution

China has set an economic growth target of around 5% for 2025, marking the third consecutive year it has aimed for this milestone. This decision comes on the heels of a 5% growth in 2024, which saw the country’s GDP reach 134.9 trillion yuan ($18.77 trillion). Despite maintaining the same target since 2023, achieving it this year presents significant challenges, both externally and domestically. The target reflects China’s cautious optimism amidst global economic uncertainties, signaling its resolve to sustain growth while navigating a complex landscape.

Facing External Pressures: The Escalating Trade War with the U.S.

The external landscape for China is increasingly fraught with challenges, particularly the escalating trade war with the United States. The U.S. has doubled tariffs on Chinese goods to 20%, effective March 4, 2025, prompting Beijing to retaliate with additional tariffs of up to 15% on American agricultural products and energy exports. This tit-for-tat exchange underscores the intensifying trade tensions between the two global powers, complicating China’s efforts to maintain stable export growth. China’s exports are sensitive to tariff fluctuations, making this trade war a critical external pressure point in 2025.

Domestic Challenges: Sluggish Demand and Structural Issues

Domestically, China faces a myriad of challenges that threaten to dampen its economic momentum. Weak consumer demand persists, exacerbated by a sluggish property sector, an aging population, and rising youth unemployment. These structural issues have created a perfect storm, hampering domestic consumption and investment. The property sector, a significant driver of China’s economy, continues to grapple with a protracted crisis, while the aging population和rising unemployment among young people further complicate the economic outlook. Addressing these domestic challenges is crucial for sustaining growth and ensuring social stability.

Policy Adjustments: Targeted Measures to Stimulate Growth

In response to these challenges, the Chinese government has announced several policy adjustments aimed at stimulating economic growth. Notably, the consumer price index (CPI) target has been slashed to around 2%, marking the first time it has been set below 3% since China began specifying the figure in its annual work reports 20 years ago. This adjustment reflects the government’s recognition of weak consumer demand and its efforts to stabilize inflation expectations. Additionally, China has unveiled a budget deficit of around 4% of GDP, the highest in over three decades, signaling a commitment to fiscal expansion and targeted support for households and industries.

Expert Analysis: Understanding the Broader Implications

Experts have weighed in on the significance of these policy adjustments. Dr. Lizzi C. Lee, a fellow on the Chinese economy at the Asia Society Policy Institute’s Center for China Analysis, notes that the lower CPI target suggests Beijing does not anticipate a sharp rebound in consumer spending soon. This perspective highlights the cautious tone of the government’s economic strategy, which prioritizes stability over aggressive growth. The budget deficit and tariff measures, according to observers, indicate a strategic focus on boosting consumer spending and countering the impact of declining exports, especially those sensitive to tariffs. These insights provide crucial context for understanding the motivations behind China’s economic policies in 2025 and beyond.

Conclusion: Navigating the Path to Sustainable Growth

In conclusion, China’s economic trajectory in 2025 is shaped by both ambition and caution. With a growth target of around 5%, the government is signaling its confidence in supporting economic expansion despite formidable external and domestic challenges. The escalating trade war with the U.S., sluggish domestic demand, and structural issues like the property sector crisis all pose significant hurdles. However, through targeted policy adjustments, including the slashed CPI target and increased budget deficit, China is attempting to navigate these challenges and restore economic momentum. As the world watches, China’s ability to balance growth and stability will be a critical determinant of its economic success in 2025 and beyond.