Breakdown of China's 5% GDP Target

Does the U.S. Matter?

Amid all the uproar over Trump’s tariff war on China, Chinese Premier Li Qiang quietly rolled out China's 2025 growth goal on the opening of the 14^th National Peoples Congress on Tuesday: an ambitious 5% GDP growth target. The question is: how does China plan to deliver?

Here are current market reactions to Trump’s first salvo in his tariff war: the U.S. Dollar Index has fallen to around 105, while the Chinese yuan rebounded by over 500 points this week. In the Chinese stock market, the Shanghai Composite Index fell by 0.5% following Trump’s announcement of the 10% additional tariff on China, a much calmer response compared with the 3% decline in the similar situation in 2018.

A forecast of China’s economic resilience against Trump’s blow would require a deep dive into China’s National People's Congress, or NPC-an equivalent of US Congress but with larger scope of responsibilities. It is also a venue where people can catch a whiff of China’s policy changes-something that doesn’t reveal itself through various lobby groups the way it does in the West.

So what did Chinese Premier Li Qiang say in his Government Work Report 2025 at the NPC and what lies beneath? Does the U.S. matter?

• A More Proactive Fiscal Policy

According to the report, China’s fiscal stimulus policies for 2025 will be bolder.

Li Qiang:“Fiscal expenditure will increase significantly. The budget deficit ratio is set to rise to around 4%, up by 1 percentage point compared to the previous year, representing an increase of 1.6 trillion yuan. ”

With regard to deficit ratio, China is not afraid to reach the upper limit of various market expectations since last year, hitting the highest level in more than 30 years, though many domestic experts point to international statistics to put the data into perspective-it is still significantly lower than most developed economies, with the long-term deficit ratios of the United States and Japan both exceeding 5%.

• Easing Local Debt

Li Qiang: “Plans include issuing 4.4 trillion yuan in local government special bonds, an increase of 500 billion yuan compared to last year. These funds will primarily be used for investments in construction, land reserves, the purchase of existing housing stock, and the resolution of overdue payments owed to enterprises by local governments.”

Readers familiar with China’s local finances may know that the slump in China’s real estate sector in recent years has, to some extent, exacerbated local debt issues. Whether the central government will assist local governments in alleviating debt has become a closely watched issue and a topic of domestic debate. Based on the aforementioned paragraph, it appears that the central government will play an active part in easing the local debt burden.

• Stabilizing the Stock and Housing Markets

Li Qiang: "Optimize and innovate structural monetary policy tools, make greater efforts to promote the healthy development of the real estate and stock markets, and increase support for technological innovation, green development, consumption stimulation, as well as private and small businesses."

It’s worth mentioning that this is the first time stock market has been mentioned in the Government Work Report. In February, U.S.-listed Chinese assets saw broad-based strength from global capital, driven by widespread speculation regarding the current undervaluation of Chinese assets ever since Deepseek emerged.

• Boosting Consumption and Expanding Domestic Demand

Li Qiang: “Vigorously stimulate consumption and improve investment efficiency, comprehensively expand domestic demand. Promote a better integration of consumption and investment, accelerate addressing the shortcomings in domestic demand, especially in consumption, and make domestic demand the main driving force and stabilizing anchor for economic growth.”

The word "consumption" was mentioned 32 times in this year’s report, a significant increase from 21 times in 2022. China began proactively adjusting the proportion of import and export trade to GDP as early as 2011 to 2016, reducing it to 38% in 2016—a drop from 71% in just ten years. A new development paradigm has quietly taken shape-not just a vision, but a solid advantage China can leverage.

• Advancing Greater Openness

Li Qiang:"Expand high-level opening-up, actively stabilize foreign trade and foreign investment. Regardless of changes in the external environment, always adhere to an unwavering commitment to opening-up, steadily expand institutional opening, and orderly expand autonomous and unilateral opening, promoting reform and development through openness."

According to the report, China will gradually open up sectors such as the internet and culture, as well as areas such as telecommunications, healthcare, and education. This is undoubtedly good news for overseas investors. Measures already in place include granting zero-tariff treatment to all products from the least-developed countries that have established diplomatic relations with China and expanding the list of countries with unilateral visa-free entry.

Overall, it appears that the Chinese decision-makers are charting a more assertive path for the country, with enough confidence to sail into the unknown. The South China Morning Post's headline said it the best: "As Trump pursues isolationism, China vows to spend more and open to the world." Of course, one could argue that Trump's radical "conservative reforms" present opportunities for China as global capital shifts and reallocate out of panic. But that will merely be icing on the cake rather than a precondition for China’s economic development-when China casts its gaze upon the whole wide world, the U.S. neither occupies nor should occupy a place that outweighs its actual power.