China has taken a decisive step in reshaping its economic landscape by adding 10 U.S. firms to an unreliable entities list, potentially restricting their business operations within the country. This action coincides with the release of significant economic data and policy changes as the nation gears up for 2025. Consumer prices saw a modest increase of just 0.2% over the past two years, while producer prices have been on a steady decline for more than two years. In a notable fiscal move, Beijing raised its budget deficit target to 4% of GDP, up from last year's 3%, marking the highest deficit on record since 2010.
The annual parliamentary gathering known as the "Two Sessions" commenced on Tuesday with the opening ceremony of the Chinese People's Political Consultative Conference. During this event, China set its GDP growth target for 2025 at approximately 5%. This ambitious goal comes after the country's economy expanded by 5% in 2024. The previous high for the GDP growth target was 3.6% in 2020. Additionally, Beijing revised its annual consumer price inflation target to around 2%, the lowest point in over two decades.
China's retail sector has faced challenges, with retail sales growth dropping sharply to 3.4%, down from 7.1% in 2023. The real estate sector also experienced a notable decline, with investments falling by 10.6% last year compared to the previous year. To address these economic hurdles, the government has outlined plans to issue 1.3 trillion yuan in ultra long-term special treasury bonds in 2025.
"We hope to work with the U.S. side to address each other's concerns through dialogue and consultation on the basis of mutual respect, equality, reciprocity, and mutual betterment," stated Lou Qinjian.
Beijing has also increased tariffs on certain U.S. goods by up to 15%, effective from March 10, and imposed export restrictions on 15 U.S. companies. These measures reflect ongoing tensions between China and the United States, highlighting the geopolitical complexities impacting economic relations.
"At the same time, we never accept any act of pressuring or threatening, and will firmly defend our sovereignty, security, and development interests," Lou Qinjian emphasized.
The broader economic picture reveals a mixed landscape. While China's economy grew by 5% in 2024, consumer prices have remained largely stagnant, rising only 0.2% over the last two years. Producer prices have continued their downward trajectory for over two years, signaling persistent deflationary pressures within the manufacturing sector.
In response to these challenges, Beijing's decision to raise its budget deficit target to 4% of GDP signifies a strategic move to stimulate economic growth and manage financial risks. This adjustment marks a significant increase from last year's target of 3%, setting a new record for the highest deficit since data began being recorded in 2010. The previous record high was 3.6% in 2020.
"China… is opposed to over-stretching the concept of national security or politicizing economic and technological issues," Lou Qinjian remarked.
The Two Sessions gathering serves as a critical platform for outlining China's economic priorities and strategies for the coming year. With a focus on achieving a GDP growth target of around 5% in 2025, China aims to navigate its economic challenges while maintaining stability and fostering development.
"There is no denying that AI technologies are accompanied by some unknown risks and challenges and will bring new tasks in areas like security, social governance, morality, and ethics…. It will inevitably have an impact on production," Lou Qinjian noted.
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