Key Insights on China’s Legislative Session and Economic Growth

BEIJING — China has initiated its yearly parliamentary gathering, the National People’s Congress, underscoring key governmental priorities for the upcoming year. Premier Li Qiang highlighted the significance of stabilizing the economy and expanding applications of artificial intelligence in his work report.

The Chinese government also pledged to tackle issues such as the persisting property market woes and increasing government debt, which are hindering economic progress. Enhancing employment opportunities, and providing improved public education, healthcare, and social security were also on the agenda.

One of the major objectives outlined was aiming for ‘around 5%’ economic growth by 2025, maintaining consistency with the previous two years. Official statistics indicate that China’s economy expanded by 5% last year, largely driven by robust exports and stimulus interventions. However, the International Monetary Fund projects a deceleration in growth this year, estimating it to be around 4.6%.

A significant concern remains the potential trade conflict with the United States, involving reciprocal tariffs imposed on each other’s goods. These tariffs could potentially reduce China’s economic growth by up to 1.1 percentage points this year, according to the Maybank Investment Banking Group. Li mentioned the “increasingly complex and severe external environment,” with rising “tariff barriers” and geopolitical tensions contributing to economic uncertainty.

A primary emphasis in Li’s report was on boosting “inadequate domestic demand, particularly insufficient consumption.” Stimulating domestic demand is intended to serve as the principal engine and stabilizer of China’s economic growth.

Due to an ongoing property market slump, China’s citizens are hesitant to increase their spending, causing a deflationary trend that could exacerbate economic challenges. To counter this, the government plans to raise the fiscal deficit ratio to 4% from last year’s 3%, and to issue ultra-long special treasury bonds totaling 300 billion yuan ($41.3 billion) to fund consumer goods trade-in initiatives that are already being phased in.

Technological self-reliance, particularly in AI and critical tech fields, is a central ambition for President Xi Jinping. As the U.S. has tightened restrictions on China’s access to advanced technologies like semiconductors over security concerns, China aims to cultivate such innovations domestically. Li committed to fostering research and development in “core technology in key fields,” with a focus on AI advancements in smart manufacturing, new-energy vehicles, and robotics.

Addressing the property market decline and local government debt is also on Beijing’s agenda. The recent property slump, aggravated by prominent developers failing to deliver on their projects, requires the government’s attention. Li ensured efforts to stabilize the real estate market, such as lifting property transaction restrictions and ensuring the financial health of real estate projects.

Concurrently, the central government is set to tackle the issue of rising local government debt, particularly targeting the “hidden debts of local governments.”

China plans a 7.2% increase in defense spending this year, a percentage consistent with last year. A spokesperson from the National People’s Congress indicated that the defense budget remains measured, constituting less than 1.5% of GDP. With the world’s largest armed forces and the second-largest military budget after the U.S., China is steadfast in its desire to assert territorial claims and challenge U.S. influence in Asia.

On the matter of Taiwan, which China views as a separatist region, the work report reiterated the goal to “resolve the Taiwan question,” aiming for reunification. Beijing remains firm against separatist activities advocating Taiwan’s independence and external interference in cross-strait relations.