China sets GDP target at about 5% despite US tariffs

The meeting of the National People’s Congress comes one day after Donald Trump imposed another 10% tariff on China, threatening to cripple the export engine that last year contributed to almost a third of economic expansion. Adding to Beijing’s problems, the nation is on track to record its longest streak of deflation since the 1960s, while the property crash has yet to bottom out.

President Xi Jinping’s bullish goal will likely require his lieutenants to roll out more aggressive stimulus as promised in December. Economists have called for that campaign to include greater public spending directed, at least in part, toward boosting weak consumer spending.

The growth and budget targets mean “the government is willing to support the economy,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “This should be reassuring to the markets.”

Maintaining a brisk pace of economic growth is important to social stability. Every one percentage of GDP expansion can lead to the creation about 2.5 million new jobs, making around 5% growth a necessity to keep employment steady, according to estimates by Zhu Baoliang, formerly chief economist at think tank the State Information Center. The government forecast over 12 million graduates will enter the job market in 2025, slightly higher than last year.

China needs to achieve a growth rate of around 5% to fulfill Xi’s pledge of turning it into a “medium-developed country” by 2035, which economists say implied doubling in the size of the economy from 2020 levels.

There are recent signs pointing to an improving outlook for the economy. DeepSeek’s recent breakthrough in artificial intelligence boosted market sentiment, as did a rare meeting between Xi and homegrown technology champions.

But the question now is how long the momentum will last in the face of Trump’s unpredictable tariff announcements and the intensifying competition between China and the US for tech supremacy.

A Bloomberg survey on 77 analysts forecast the Chinese economy will only grow 4.5% in 2025, reflecting the challenge of meeting the official target again this year.

In a tacit recognition of deflationary pressures, the government lowered its official target for consumer price increase to around 2%, according to the report seen by Bloomberg News, the lowest since 2003. While that goal was largely regarded as a ceiling in the past, trimming it shows officials have conceded faster price growth will be a challenge after consumer inflation reached only 0.2% for the past two years. A growing chorus of economists are calling for the government to make the target a binding one for policies.

Li’s report delivered to thousands of delegates at the Great Hall of the People will also provide clues on authorities’ specific plans for fiscal and monetary stimulus, which could impact global commodity prices and inflation.

“This is positive and important as a growth stabilizing factor,” Wee Khoon Chong, senior APAC market strategist for Bank of New York Mellon Corp., said of China’s targets. “All that’s needed now is effective implementation of all measures announced. We expect further credit and monetary easing to complement China fiscal strategy.”