China Stimulus News : China is flexing its economic muscle with a bold stimulus package unveiled this week at its annual National People’s Congress (NPC), aiming to sustain a 5% GDP growth target for 2025 despite mounting trade pressures from the United States.
Highlights
- China unveils aggressive stimulus at Two Sessions, targeting 5% GDP growth for 2025.
- Measures include $179 billion in special bonds and bank recapitalization to counter U.S. tariffs.
- Beijing prioritizes consumption over exports as Trump’s 20% duties strain trade.
China Ramps Up Economic Stimulus To Boost Growth Muscle Amid Ongoing US Trade Tensions
Premier Li Qiang, addressing the Two Sessions on March 5, promised “more proactive” fiscal policies—including 1.3 trillion yuan ($179 billion) in special treasury bonds and a record 4% budget deficit—to bolster consumption and shield the world’s second-largest economy from President Donald Trump’s escalating tariffs.
As U.S. duties jumped from 10% to 20% on March 4, Beijing’s shift from export reliance to domestic demand signals a strategic pivot in a trade war set to test its resilience.
A Stimulus Blitz to Offset Trade Headwinds
Li’s opening speech Tuesday warned of “changes unseen in a century” as Trump’s tariffs threaten China’s $405 billion U.S. export market (2023 data). The NPC, concluding March 11, greenlit a suite of measures: 4.4 trillion yuan in local government debt issuance, 500 billion yuan to recapitalize state banks, and expanded consumer trade-in subsidies—now over 300 billion yuan—covering EVs, appliances, and smartphones.
The budget deficit, up from 3% in 2024, marks its highest since 2010, per Wind Information, reflecting Beijing’s urgency. “We’re cleaving the waves,” Li said, per Reuters, as the CSI 300 index held steady Friday, signaling markets had priced in the 5% goal.
The stimulus builds on September 2024’s aggressive easing—rate cuts, mortgage relief, and a 10 trillion yuan debt package—escalated after Trump’s election.
Foreign Minister Wang Yi, vowing “retaliatory action” Friday against the U.S.’s “arbitrary” 20% duties, hinted at broader tariffs beyond China’s March 10 levies on U.S. farm goods (15% on chicken, corn). Goldman Sachs predicts a 0.7-point GDP drag from Trump’s tariffs, offset by Beijing’s fiscal push, though exports—70% of 2024’s 4.9% growth—face a sharper slowdown.
Consumption Takes Center Stage
For the first time, “boosting consumption” topped the NPC’s 2025 priorities, mentioned 31 times in Li’s report versus 21 in 2024, per Guotai Junan analysts, displacing technology (28 mentions).
Subsidies now target households over factories, a shift from decades of investment-led growth, as domestic demand falters—imports like rare earths fell 24% in early 2025, per Reuters. “Spending is still weak outside subsidized goods,” Moody’s Harry Murphy Cruise told Reuters, noting January’s government wage hikes ($12–20 billion) aim to jolt confidence amid a property slump and deflation risks.
A High-Stakes Balancing Act
China’s stimulus spree—echoing 2020’s 3.6% deficit peak—faces a delicate dance: cushioning Trump’s trade blows while avoiding overcapacity that fueled past tensions.
The Dow shed 300 points Friday as global markets brace for fallout, with Canada’s $155 billion retaliation and Mexico’s Sunday tariff plan complicating North American unity.
Li’s “giant ship” metaphor, per Policy Circle, projects confidence, but analysts like Macquarie’s Larry Hu caution Beijing may wait until April’s GDP data to unleash more, as in 2024’s late push to hit 5%. With Xi Jinping eyeing tech self-reliance alongside consumption, China’s 2025 growth muscle will be tested by both U.S. tariffs and its own economic rebalancing.
