China targets GDP growth of about 5% in 2025

China set its 2025 GDP growth target at “about 5%” on Wednesday, laid out a stimulus package to boost the economy amid growing trade tensions with the US

Beijing raised its fiscal deficit target from 3% last year to “about 4%” of GDP as the country’s largest legislative body held its annual general meeting.

According to data accessed via Wind information, the 4% deficit marks the highest record dating back to 2010. In 2020, the previous high was 3.6%, data show.

The government’s report outlines plans to issue 1.3 trillion yuan ($178.9 billion) in ultra-long-term special financial obligations in 2025, with 300 billion yuan more than last year. An additional 500 billion yuan of special financial obligations will be issued to support large state-owned banks.

The expanded fiscal package also includes the issuance of 4.4 trillion yuan of local government special surveillance bonds this year, which will ease funding stocks.

According to the Asian Association’s Policy Research Institute, Beijing has implicitly acknowledged the sluggish domestic demand and revised its annual consumer price inflation target to “approximately 2%” (lowest in over 20 years).

The new inflation targets act as ceilings rather than realising targets. Consumer prices rose just 0.2% in 2024 and 2023, but producer prices have fallen for more than two years.

Emphasizing domestic consumption as a top priority, Beijing has vowed to expand its consumer goods trade-in program for another 300 billion yuan on extremely long special financial obligations.

Officials who drafted the work report told the news on Wednesday that external uncertainty is growing, with the 5% GDP target needing “very difficult work” to achieve, according to CNBC translation of the Chinese statement.

Regarding the decline inflation targets, Chen Changsheng, a member of the government’s work reporting team, acknowledged that if prices are too low, it would be difficult to encourage businesses to invest and increase consumer revenue.

He noted that the work report requires four tasks to address the depressed price. They use greater efforts to prevent price wars and stabilize real estate prices by expanding financial support, lifting consumption and restricting regulations.

China is trying to maintain unemployment rates in cities that have added more than 12 million jobs in urban areas at 5.1% last year.

The country’s annual parliament gathering known as “two sessions” began on Tuesday with the highest advisory body, the opening ceremony of the Chinese political council meeting.

The National People’s Assembly will begin its meeting on Wednesday and is expected to close the annual session on March 11th. Foreign Secretaries and Secretaries of several economic sectors will hold interim press conferences.

China’s offshore Yuan slipped to 7.264 against the US dollar as Chinese Prime Minister Li Qiang released a work report at the National People’s Assembly in a live streaming session.

Exchange rates are “generally stable at an adaptive and balanced level,” he said.

The opening of China’s National Congress coincides with President Donald Trump’s planned speech at a joint session of Congress where Trump can share his agenda and his goals for the year.

On the issue of Taiwan, Beijing emphasized that he is “decisively opposed to separatist activities” aimed at independence of democratically governed islands, whilst promoting “the peaceful development of cross-sectional relations.”

This year’s Congressional meeting is now placing an additional 20% duties in about a month as Trump imposes new tariffs on Chinese goods.

Beijing responded on Tuesday with up to 15% extra charges for certain US products starting March 10, as well as restrictions on exports to 15 US companies. China has also added 10 US companies to its unreliable entities list that can limit its ability to do business in Asian countries. Many of the appointed US businesses work in aerospace, defense, or drones.

“We want to work with the US side to address each other’s concerns through dialogue and consultation, based on mutual respect, equality, reciprocity and mutual improvement,” Lou Kinjian, spokesman for the 14th National People’s Congress’ third session, told reporters Tuesday morning.

“At the same time, we will never accept any acts of pressure or intimidation and will firmly defend the interests of sovereignty, security and development,” he said in Mandarin through official translations.

An increase in US duties considers exports to China. This is a rare, bright place in an economy struggling with insufficient domestic demand.

The world’s second largest economy rose 5% in 2024, but retail sales growth fell sharply from 7.1% in 2023 to 3.4%. The real estate drag has been ongoing, with investment in the sector down 10.6% since last year.

Investors have been closely watching Beijing’s efforts to deal with the country’s economic slowdown after an unexpected high level of support pledge in September prompted stock rallies. Market profits have been re-evaluated after Chinese national president Xi Jinping held a rare meeting last month with entrepreneurs, including Alibaba’s Jack Ma and artificial intelligence startup Deepshek’s Lian Wenfeng.

“It is undeniable that AI technology comes with some unknown risks and challenges, bringing new tasks to areas such as security, social governance, morality, and ethics.

“China… opposes to overstretching the concept of national security and politicizing economic and technical issues,” he said.

While details are lacking, leadership said Wednesday that it will work to support the private sector. NPC members will carefully amend and improve the draft of the Private Economic Promotion Act, Lou said.

Louise Lou, the largest Chinese lead economist in Oxford Economics, told CNBC on Wednesday the announcement was “a symbolic move that perhaps shows policymakers will focus on stabilizing everything.”

The benchmark CSI 300 index has been largely unchanged, reflecting the market was selling large growth target prices.

The 10-year government bond yields fell slightly as leadership vowed to “timely reduce” interest rates and required reserve ratios. China’s offshore yuan depreciated to 7.2729 against the US dollar.

China’s growth targets could bolster the demand for stronger stimulus from Beijing this year as the economy struggles to emerge from long-term real estate slump, weak consumer trust and local government debt stress.

However, David Kuo, co-founder of Smart Investor, described China’s 5% growth target as “fantasy.”

“From what I understand economics, the economy grows through consumer spending… If you look at private sector spending, government spending, exports (but) these four levers or drivers, there is no consumer spending,” Kuo told CNBC’s Street Sign Asia on Wednesday.

– CNBC’s Bernice OOI contributed to this report.