By the Basilinna Team

March 12, 2025

Suryaputra, D. K. (2024, June 21). Great Hall of the People, Rendahuitang West Road, 前门 Xicheng District, China. Source: Unsplash.

The Brief

China’s Two Sessions are underway – their annual meeting of the National People’s Congress (NPC) and adjacent Chinese People’s Political Consultative Congress (CPPCC). The sessions do not usually break news, that’s usually done in the major Party meetings, but they do underscore the strategy and provide some notable updates. Premier Li Qiang delivered the 2025 Government Work Report (GWR), laying out the country’s economic and development agenda for the year ahead. Our talking points synthesize the coverage of this political event and frame up what’s important.

Your Talking Points

China’s leaders are still confident in an “around” 5% growth target but will finally launch the strongest stimulus in decades to hit the goal.

China’s target of “around” 5% GDP growth next year—and for the third consecutive year— demonstrates China’s leader’s confidence (or unwillingness to concede weakness) in the economy. It will require aggressive stimulus, including expanded fiscal spending, a higher deficit target, and more accommodative monetary policy to counter external risks, particularly U.S. tariffs. But adding the “around” creates some wiggle room regarding the target.

Beijing has signaled a decisive policy shift, adopting a moderately accommodative monetary policy for the first time since 2008. The government work report outlines plans for timely interest rate and reserve requirement cuts, with markets expecting the first rate cut within two months, as Trump’s "America First Trade Policy" sets an early April tariff review deadline. Beijing also pledged currency stability, avoiding significant depreciation as a countermeasure to tariffs.

On the fiscal front, China is pursuing its largest stimulus in decades, raising the deficit target to 4% of GDP and issuing record-high local government and ultra-long-term bonds (see Figure 1). These levels exceed those of the 2008 financial crisis and COVID-19, highlighting Beijing’s urgency in supporting growth through public spending – again, because of the slowdown in exports.

Figure 1. China’s 2024 vs. 2025 Economic Targets

China is (now) serious about unlocking consumption.

By necessity, Beijing is prioritizing increasing domestic consumption as its top priority, as the other sources of growth face challenges: government investment from high levels of debt and the continuing real estate crisis and exports from slowing demand and threats of increased tariffs. It remains to be seen if consumers will have the confidence in their economic future to spend down their savings.

China has long attempted to shift from an investment- and export-driven growth model to prioritizing domestic consumption but has been unable to create the confidence necessary to stimulate additional spending. Now the pressure is on. Rising U.S. and potentially global tariffs and mounting local debt make the old approach unsustainable.

The GWR lists boosting consumption as the top priority for the first time, aiming to significantly raise consumption’s contribution to GDP. Beijing proposed allocating RMB 300 billion ($40 billion) in ultra-long-term bonds to expand trade-in policies for electronics, home renovations, and interior design products—sectors expected to see stronger demand this year.

In addition, Premier Li Qiang pledged to expand childcare and elderly care subsidies, both big portions of household spending today. China has also promised direct cash subsidies for having additional children and threw in free preschool education in an attempt to raise childbirth rates and promote consumption.

The biggest determinant to driving domestic demand lies in revitalizing the private sector, which provides income for over 80% of China’s urban workforce, 90% of new jobs, and contributes 60% to GDP.

Leading up to the NPC, President Xi held a high-profile symposium with private entrepreneurs, signaling a shift in stance by reaffirming stronger policy support and pledging a fairer business environment. This meeting was an important signal that the Chinese government was going to reduce the regulatory burdens on the private sector and promote its importance – especially as a driver in technological innovation. It remains to be seen, however, how Beijing will balance competing interests between state-owned and private enterprises.

Industrial policy still rules – but can the government regulate the tech sector into out-innovating the rest of the world? DeepSeek says maybe.

China remains committed to central government guidance in the economy: heavily investing in AI, quantum technology, and advanced manufacturing. And it has unleashed the private sector, which is critical in the “tech race” happening between the U.S. and China.

While China moved industrial policy, branded as “New Quality Productive Forces,” from the top priority last year to second place, Beijing has made it clear that efforts to strengthen advanced manufacturing and strategic emerging industries will continue.

DeepSeek’s success has improved investor confidence in China’s technology sector, and thus, Beijing is eager to nurture a new generation of technology leaders to drive economic growth and industrial upgrading. DeepSeek’s success has helped change the government’s stance towards the private sector.

This year’s NPC outlined plans to advance biomanufacturing, quantum technology, embodied intelligence, and 6G, with AI at the core. Key initiatives include expanding “AI+” applications to integrate AI into traditional industries and developing next-generation intelligent terminals, from AI-powered vehicles and mobile devices to robots and manufacturing equipment.

However, China’s tech ambitions may further strain ties with the U.S., which continues to curb its access to strategic technology. While Trump’s approach to Chinese tech remains unclear, expanding AI applications and strategic investments could raise U.S. scrutiny, potentially heightening risks for multinationals and accelerating supply chain decoupling.

China doubles down on its commitment to attract foreign firms but the core focus is encouraging Chinese companies to “go out”.

Amid growing global protectionism, China is an outlier in its stated commitment to market openness and is taking steps to reassure foreign investors who have fled or cooled in recent years. At the same time, it is actively encouraging Chinese companies to expand overseas to diversify away from the United States and strengthen ties with other countries. China is now the largest trading partner to 70% of the world.

Premier Li stated that China maintains its commitment to further opening up and continues to list promoting foreign trade and attracting investment as its fifth-ranked priority.

The GWR reiterates support for foreign investment, with pilot projects announced to test further opening in services, internet, telecom, healthcare, and education while stressing equal treatment in procurement, regulation, and licensing. That said, continued restrictions on foreign firms remain an issue. And foreign firms’ concerns about the Chinese economy and the geopolitical landscape has led to diversification of supply chains and significant drops in investment in China. A turnaround in the economy could help reverse some of this slide.

A more notable shift this year is China’s growing emphasis on outbound capital and overseas business expansion. Facing rising tariffs, Beijing promises to expand support for Chinese firms operating abroad, particularly in cross-border e-commerce, logistics, and overseas warehouse construction. These measures aim to help firms establish overseas production, mitigating tariff risks and reducing trade imbalances amid growing global protectionism.

China’s Two Sessions reinforced their strategic pivot—getting serious about an economic stimulus and pushing domestic consumption while still wielding industrial policy as the guiding light. The government’s commitment to market openness contrasts with rising global protectionism, but whether these measures will restore investor confidence and drive sustainable growth remains uncertain. As always, the real test lies in execution—can China’s regulatory recalibration and policy shifts truly unleash innovation, spur consumption, and balance global tensions? The coming months will reveal whether Beijing’s ambitious roadmap translates into tangible economic momentum or merely sets the stage for further challenges.

The timeline of China’s Economic Stimulus

From day one of China’s stimulus efforts, the Basilinna Institute has closely tracked the country's stimulus measures, monitoring how the country is adapting to shifting economic dynamics. View the timeline of these measures for a deeper understanding of what is unfolding:

Talking Points: Key Takeaways from China’s Two Sessions