China has maintained its economic growth target for 2025 at around 5%, reaffirming its commitment to allocating greater financial resources than last year to counter deflationary pressures and mitigate the impact of rising U.S. tariffs.

This target aligns with a Reuters report from December and is outlined in an official government document prepared for the annual meeting of the National People's Congress (NPC), China's legislature.

Additionally, China has set its budget deficit target at 4% of GDP for 2025, up from 3% in 2024. Beijing also plans to issue 1.3 trillion yuan (approximately $179 billion) in special treasury bonds this year, an increase from 1 trillion yuan in 2024. Local governments will be permitted to issue 4.4 trillion yuan in special-purpose debt, up from 3.9 trillion yuan last year.

From the central government’s special debt funds, 300 billion yuan will be allocated to support consumer incentives for purchasing electric vehicles, household appliances, and other goods. Additionally, 500 billion yuan will be used to refinance major state-owned banks, while 200 billion yuan will be directed toward upgrading manufacturing equipment.

Military Spending and Trade Tensions

China also announced a 7.2% increase in its defense budget for 2025, mirroring last year’s rise. The country remains the world’s second-largest military spender after the United States, whose proposed military budget for the year stands at $850 billion.

Amid escalating trade tensions with the U.S. under President Donald Trump’s administration, China’s vast industrial complex faces mounting economic constraints. Sluggish domestic consumption and a heavily indebted real estate sector have further exposed the economy to risks.

Trump has threatened to impose additional tariffs on a wide range of countries, posing a challenge to the global trade system that China has relied on for decades. As a result, Chinese policymakers are under increasing pressure to implement measures that stimulate domestic consumption and reduce reliance on exports and investment-driven growth.

Despite achieving a 5% growth rate in 2024—one of the highest in the world—China only met this target after introducing a delayed stimulus package. However, many citizens continue to experience job and income instability as businesses cut prices and operational costs to remain competitive in international markets.

While China maintains a substantial annual trade surplus of $1 trillion, domestic manufacturers struggling with weak demand and growing challenges in the U.S. market—where they export goods worth over $400 billion annually—are being forced to explore alternative export markets.

This shift raises concerns about potential price wars and profit margin compression, alongside the risk that governments in these new markets may impose trade barriers to protect their domestic industries from Chinese competition.

Since taking office in January, Trump’s administration has imposed an additional 20% in tariffs on Chinese goods, with the latest 10% hike coming into effect on Tuesday. In response, China has swiftly announced countermeasures, increasing tariffs by 10–15% on U.S. agricultural and food products while restricting 25 American companies from export and investment activities within China.