Tariff war: China sets GDP target of 5% for 2025

China has set its 2025 GDP growth target at “around 5%,” as announced by Premier Li Qiang at the opening session of the National People’s Congress (NPC) in Beijing on Wednesday.

The annual government work report outlined strategies to stabilize economic growth, including boosting domestic demand and creating 12 million new urban jobs. However, economists view the 5% target as challenging, given last year’s reliance on a last-minute export surge to meet the goal. In December 2024, exports rose by 10.7%, contributing to a record $1 trillion trade surplus. This year, with heightened trade tensions following Donald Trump’s return to the White House, relying on exports for growth will be more difficult.

Trump recently doubled tariffs on most Chinese imports to 20%, with some duties reaching 45%. In response, China imposed retaliatory tariffs of up to 15% on U.S. agricultural products. Alicia García-Herrero, chief economist for Asia Pacific at Natixis, described China’s growth target as “very ambitious” and “unreachable” without substantial stimulus measures.

To counter economic headwinds, economists have urged Beijing to introduce policies that stimulate domestic demand. Li Qiang emphasized making domestic consumption the primary driver of growth but provided few details beyond a plan to issue 300 billion yuan ($41.2 billion) in special treasury bonds. This funding will support a consumer goods trade-in program, doubling last year’s allocation, which generated 240 billion yuan in home appliance sales.

China is also focusing on technological innovation and high-tech industries, which President Xi Jinping refers to as “new quality productive forces.” The government pledged to increase funding for future industries such as artificial intelligence and 6G. This strategy aligns with China’s green ambitions, particularly in sectors like electric vehicles and battery storage. However, experts warn that China’s climate goals remain inadequate.

The government’s report set a target to reduce carbon intensity—the amount of CO2 emitted per unit of GDP—by 3% in 2025. Critics argue this is insufficient, as China’s economy remains highly energy-intensive. Greenpeace East Asia policy adviser Zhe Yao noted that despite significant growth in renewable energy, China is not becoming more energy-efficient and risks missing its 2021-2025 target of an 18% reduction in carbon intensity.

On the geopolitical front, China reaffirmed its commitment to “firmly advancing” reunification with Taiwan and strengthening civil-military coordination. A separate report revealed that China’s defense budget will increase by 7.2% in 2025, consistent with last year’s figure. Despite this rise, China’s military spending remains below 2% of GDP, compared to over 3% in the U.S.

The NPC session will continue until March 11, alongside the Chinese People’s Political Consultative Conference, a key advisory body meeting in Beijing this week.