BEIJING (AFP) – China set an ambitious annual growth target of around five per cent yesterday, vowing to make domestic demand its main economic driver as an escalating trade war with the United States (US) hit Beijing’s exports.
Beijing also announced a rare hike in fiscal funding, allowing its budget deficit to reach four percent this year as it battles stuttering employment for young people, stubbornly low consumer demand and a persistent property sector debt crisis.
The headline growth figure announced by Premier Li Qiang at an annual conclave was broadly in line with an AFP survey of analysts, although experts said it is ambitious considering the scale of China’s economic challenges.
Some 12 million new jobs will be created in Chinese cities under the plans as Beijing pushes for two per cent inflation this year.
A government work report vowed to make domestic demand the “main engine and anchor” of growth, adding that Beijing should “move faster to address inadequate domestic demand, particularly insufficient consumption”.
And in a rare move, Li said China would hike its fiscal deficit by one percentage point, which analysts have said will give Beijing more latitude to tackle its economic slowdown.
Beijing’s growth target would be “tough but possible”, said assistant professor at Singapore’s Nanyang Technological University Dylan Loh.
He said low consumption was a “confidence issue”, adding that “if people are, in their own calculations, worried about spending – especially on big-ticket items – it is far harder to address”.
Another analyst said Beijing’s policies were not yet “big enough to really like significantly drive up the consumer sentiment”.
“We need to see a very broad-based recovery of employment, income as well as the property market before we can really see a change in consumption patterns and retail sales trend,” Principal Economist at The Economist Intelligence Unit Yue Su told AFP.
Major Asian markets traded up yesterday, reversing their losses a day after US President Donald Trump imposed more blanket tariffs on Chinese imports following a similar move last month.
US tariffs are expected to hit hundreds of billions of dollars in total trade between the world’s two largest economies. “Internationally, changes unseen in a century are unfolding across the world at a faster pace,” the government work report said.
“Unilateralism and protectionism are on the rise,” it warned.
“… domestically, the foundation for China’s sustained economic recovery and growth is not strong enough,” the report said.
Chinese exports reached record levels last year.
Sentiments were clouded by a broadening trade war under Trump as thousands of delegates congregated in Beijing’s opulent Great Hall of the People for the opening session of the National People’s Congress, the second of China’s ‘Two Sessions’ political meetings this week.
Beijing announced its own measures on Tuesday in retaliation for Washington’s latest tariff hike and vowed it would fight a trade war to the “bitter end”.
The moves will see China impose levies of up to 15 per cent on a range of US agricultural products including soybeans, pork and wheat starting from early next week.
Beijing’s countermeasures represent a “relatively muted response” in comparison to Trump’s all-encompassing tariffs, wrote chief economist for Greater China at ING Lynn Song.
“The retaliation could have been a lot stronger, and with every further escalation the risks are also rising for a stronger response,” he said.
Analysts said authorities could announce further plans to boost the economy this week, adding to a string of aggressive support measures announced late last year.
China also disclosed yesterday a 7.2-per-cent rise in defence spending in 2025, as Beijing rapidly modernises its armed forces in the face of regional tensions and strategic competition with the US.
