China braces for trade war as it eyes ambitious GDP growth
By Abigail Townsend
Date: Wednesday 05 Mar 2025
(Sharecast News) - Beijing has unveiled ambitious economic growth targets for 2025, as it braces for an intensifying trade war with Washington.
Addressing the opening session of the annual National People's Congress in Beijing, premier Li Qiang said China would target GDP growth of "around 5%" in 2025.
The figure was largely expected by economists, as was the budget deficit, which has been increased to 4% from 3%. The inflation target for 2025 was lowered to 2% from "no more than 3%" last year.
The government work report also detailed plans to boost domestic demand, create new jobs and stabilise the economy.
China, once a powerhouse of growth, has been hit hard in recent years, first from Covid and then by a slump in domestic and global demand.
While it managed to meet last year's target for GDP growth - also around 5% - it is now facing a disruptive trade war with the US.
New president Donald Trump announced tariffs on a number of countries within days of starting his second term, and this week doubled duties on most Chinese goods to 20%, including on smart phones and laptops.
In response, China has imposed its own tariffs of up to 15% on a wide range of US agricultural goods.
China's foreign affairs ministry said: "If war is what the US wants, be it a tariff war, a trade war or any other type of war, we're ready to fight."
Lynn Song, chief economist, Greater China, at ING, said: "Repeating [2024's] growth target, despite a more challenging external environment, is in our view a show of confidence and a harbinger of stronger support for domestic demand.
"In his speech, Li acknowledged the 'adverse impact of changes in the international environment' as well as the impact of weak public sentiment, is dragging domestic demand.
"Given these two big headwinds, more assertive policy will be important to help pick up the pace of growth."
Alex Loo, FX and macro strategist at TD Securities, said: "Another year, another ambitious GDP growth target, which seems like a tall task for policymakers given the domestic challenges and external trade headwinds.
"Indeed, China setting such an ambitious growth target is more of a strategic attempt to project strength for upcoming trade negotiations with the US.
"We reckon 2025 GDP growth is more likely at 4.8%, meeting the around 5% target through a combination of looser monetary policy and forceful fiscal policy."
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