China: 2025 NPC Takeaways - External Challenges Prompt Marginally Higher Fiscal Stimulus
SovereignsSummary
Premier Li Qiang announced China's key economic targets and policy priorities on March 5, the opening day of the annual National People's Congress (NPC) meeting. Growth targets for 2025 were unchanged with real GDP expected at around 5% YoY. While the CPI target was lowered from 3% to 2%, on the fiscal front, authorities raised the deficit target to 4% of GDP (RMB 5.6 trillion) up from the conventional ceiling of 3% of GDP or RMB 4.1 trillion in 2024. As noted by Premier Li, 2025 is the final year for implementing the objectives and targets of the 14th Five Year Plan (2021-25). Authorities aim to complete all investment projects launched under the 14th Five Year Plan with an emphasis on defense related projects and those in bio-manufacturing, quantum technology and AI.
Key Highlights
-- China's NPC left its growth target unchanged at 5% but committed to a higher fiscal stimulus.
-- China's policy focus remains on increasing the resilience of the domestic economy and further increasing competitiveness in key high-tech industries.
-- The recent tariff measures from the Trump Administration are likely to further increase headwinds to China's growth.
"The policy direction coming out of the NPC meetings doesn't change our view of a weaker macroeconomic performance from the Chinese economy." says Rohini Malkani, Senior Vice President, Global Sovereign Ratings. "Moreover, the newly announced trade measures from the Trump Administration are likely to further increase headwinds to China's growth."