China has announced a 5% GDP growth target for 2025 during its annual Two Sessions, alongside a record-high 4% budget deficit and a 7.2% boost in defense spending. This comes as the U.S. escalates trade tensions by imposing new 20% tariffs on Chinese imports.

Obstacles to Growth

Achieving this target will be challenging due to sluggish consumer demand, an ongoing property crisis, and increasing pressure from the U.S. trade war. In response, Beijing is ramping up stimulus measures, including a $410 billion sovereign bond quota, while placing greater emphasis on private sector support and artificial intelligence development.

Strengthening the Private Sector

China is signaling a renewed focus on private businesses, highlighted by President Xi Jinping’s rare meeting with top tech leaders. Proposed legislative changes aim to bolster protections for private enterprises, ensuring they play a central role in the country’s economic strategy.

 A Major Policy Shift

Beijing’s decision to set its budget deficit at 4% of GDP represents a significant shift in economic policy. Analysts view this as a sign that the Chinese government is prioritizing aggressive stimulus to counteract economic headwinds and maintain stability.