41

China has set an ambitious growth target of “around 5%” for the year, as the government seeks to revitalize its struggling economy. This announcement comes as China grapples with a trade war with the United States, among other economic challenges. The target was unveiled during the opening of the National People’s Congress (NPC), an event where thousands of delegates gather to discuss policy changes. While the NPC is often viewed as a rubber-stamp parliament, this year’s session has garnered special attention due to the current economic climate in China.

Economic Struggles and the Impact of U.S. Tariffs

The trade war with the United States escalated this week after former President Donald Trump implemented a 10% tariff on Chinese imports, which added to a previously imposed 10% tariff in February. As a result, the total U.S. levy on Chinese goods has now reached 20%. This development threatens China’s export sector, a critical source of economic strength in recent years. In retaliation, China swiftly introduced its own tariffs ranging from 10% to 15% on certain U.S. agricultural products, such as corn, wheat, and soybeans.

Experts predict that, if the tariffs remain in place, China’s exports to the U.S. could decrease by as much as 25% to 33%. To meet its ambitious growth target, China may need to focus on boosting domestic consumption—a strategy that has proven difficult in the past. Expanding domestic demand, which had previously been a secondary priority, is now a primary objective for the government.

Beijing’s Strategy to Stimulate Domestic Spending

To drive domestic consumption, China has rolled out initiatives encouraging citizens to replace household items, vehicles, phones, and electronics. The government aims to put more money in the hands of its citizens to reduce the economy’s reliance on exports and investment. This year, Beijing has announced plans to issue 1.3 trillion yuan (approximately $179 billion) in special treasury bonds to support these economic stimulus efforts. Additionally, local governments are allowed to increase their borrowing to a total of 4.4 trillion yuan.

China has also committed to creating more than 12 million urban jobs and aims to keep urban unemployment below 5.5% by 2025. However, it is still unclear whether these initiatives will be enough to stimulate the desired growth in consumer spending. The ongoing effects of pandemic-related restrictions, a prolonged real estate crisis, and crackdowns on the technology and finance sectors have all contributed to a decline in public confidence.

Focusing on High-Quality Development

In addition to boosting domestic consumption, China is prioritizing “high-quality development,” particularly in high-tech sectors such as renewable energy and artificial intelligence (AI). This initiative is part of President Xi Jinping’s broader vision to reduce China’s dependence on the West and position the nation as a global technology leader.

Recent state media reports have highlighted the successes of Chinese companies like DeepSeek and Unitree Robotics, showcasing China’s technological advancements. The AI-driven stock rally spurred by DeepSeek’s achievements has renewed interest among foreign investors. According to the state-run Xinhua News Agency, China’s green industries and new energy initiatives, powered by cutting-edge technologies, are expected to remain significant drivers of future growth.

Despite the optimism surrounding these high-tech sectors, U.S. tariffs may undermine these efforts by discouraging foreign investment and damaging market sentiment. Harry Murphy Cruise, head of China economics at Moody’s Analytics, warns that “tariffs are set to deliver a one-two punch to China’s economy, impacting both exports and investment.”

China’s Leadership Remains Optimistic

Despite the economic challenges, Chinese leadership remains confident in the nation’s economic resilience. Liu Jieyi, spokesperson for the Chinese People’s Political Consultative Conference (CPPCC), assured the public that the fundamentals of the Chinese economy are stable and strong. However, whether China’s plans will be enough to offset the impact of the trade war and other internal economic pressures remains uncertain.

China’s strategy to overcome these challenges will require careful balancing between stimulating domestic demand and continuing its push for technological and industrial advancement. As the nation moves forward with its growth objectives, all eyes will be on the effectiveness of its policy measures and how they shape the future of China’s economy.

For more financial updates and expert analysis, visit Financial Mirror.