The Chinese government has announced its goal of achieving approximately 5% economic growth in 2025, reaffirming Beijing’s determination to sustain development despite an economic slowdown and escalating trade tensions with the United States. This target aligns with previous forecasts and underscores the authorities’ commitment to maintaining growth stability even in a challenging international environment.
A key element of the government’s strategy is increasing public spending to stimulate domestic demand and strengthen markets. This year, the budget deficit has been raised to 4% of GDP, the highest level in decades. The government plans to issue municipal bonds worth a total of 4.4 trillion RMB (approximately $600 billion) and 1.3 trillion RMB in special government bonds—slightly less than many analysts had anticipated.
To support consumption, 300 billion RMB (around $40 billion) has been allocated for subsidies. However, some experts argue that this amount may not be sufficient to significantly boost the market. Additionally, the inflation target has been lowered to 2%, the lowest level since 2003, suggesting concerns about deflationary pressures.
Initial market reactions were positive— the Hang Seng China Enterprises Index rose by 2.6%, while the CSI 300 increased by 0.4%. However, many economists emphasize that simply increasing the deficit is not enough; the key will be directing spending effectively. Without deeper structural reforms, achieving the ambitious 5% growth target may be difficult.
Maintaining a high growth rate is further complicated by the escalating trade conflict with Washington. The United States has imposed additional 20% tariffs on Chinese products, to which Beijing has responded with restrictions, including on agricultural and energy imports from the U.S., as well as limitations on American companies. In this context, only an unexpected export boom could significantly support growth, but in an environment of increasing protectionism, this appears unlikely.
Alongside economic stimulus measures, China has also increased military spending. The defense budget will nominally rise by 7.2% to 1.78 trillion RMB (about $250 billion), surpassing the overall growth of government expenditures (6.9%). Independent experts indicate that actual defense spending could be 30–90% higher than official figures, highlighting the military’s growing role in Beijing’s strategy.
Although China has demonstrated a strong commitment to maintaining 5% economic growth, increasing tensions with the United States, smaller-than-expected stimulus measures, and a lack of significant structural reforms may hinder this objective. Expanded fiscal spending may provide short-term economic support, but long-term success will depend on the effective allocation of funds and the mitigation of trade conflicts. Given ambitious military plans and limited fiscal policy easing, the future of China’s growth remains a topic of mixed opinions.
Krzysztof Kamiński – Oanda TMS
Source: https://ceo.com.pl/deficit-china-at-record-level-will-beijing-manage-to-boost-consumption-81278
