China has announced a significant increase in fiscal stimulus to support its economy, which is facing growing uncertainty due to global changes “unseen in a century”, according to Premier Li Qiang. The country aims to achieve 5% growth this year, with plans to boost consumption and cushion the impact of the escalating trade war with the US.
The move comes as China’s industrial complex is threatened by the trade war, while persistently sluggish household demand and a debt-laden property sector leave the economy vulnerable. To address these challenges, Beijing has pledged to issue 1.3 trillion yuan in ultra-long special treasury bonds this year, up from 1 trillion yuan in 2024.
The government’s efforts to support consumption come as pressure builds on Chinese officials to implement measures to fend off deflationary pressures and reduce the country’s reliance on exports and investment for growth. The term “consumption” was mentioned 31 times in Li’s report, highlighting the importance of this focus area.
Analysts say that China’s high debt levels and spending figures aim to cushion the impact of tariffs. However, critics argue that more needs to be done to bolster the country’s feeble welfare system and implement long-term reforms to stimulate household spending.
The move has sparked concerns among Chinese producers, who fear that increased exports to alternative markets will intensify price wars and raise the risk of trade barriers against Chinese goods. With Washington having added an extra 20 percentage points on existing tariffs for Chinese goods, Beijing’s retaliation may not be enough to prevent further escalation.
As China navigates this uncertain economic landscape, it is clear that policymakers must find innovative solutions to address these challenges and ensure sustained growth. The government’s efforts to boost fiscal stimulus are a step in the right direction, but more needs to be done to address the underlying structural issues driving the country’s economic woes.
Source: https://www.reuters.com/world/china/chinas-parliament-meets-shield-economy-us-tariff-salvos-2025-03-04