China concluded its largest political event of the year this Tuesday, although it left an important question unanswered: the extent to which the country will push for economic rejuvenation in 2025. The central focus of the weeklong gathering of nearly 3,000 members of the National People’s Congress was the emphasis on ramping up investment and boosting consumer spending. The concrete actions that will emerge from these discussions remain undetermined and will become evident in the upcoming months as the Communist Party seeks to manage competing priorities. A growing trade conflict with the United States adds to the uncertainty about what the future holds.
In a surprise absence, top political leader Zhao Leji, who is the chairman of the Standing Committee of the Congress, was missing due to a respiratory tract infection, according to Vice Chairman Li Hongzhong, who chaired the closing session in his stead. The Congress, often referred to as a rubber-stamp parliament, voted with an overwhelming majority to approve the annual government work report, with 2,882 votes in favor, one vote against, and one abstention. Additionally, similar votes were recorded to pass the budget and amendments to a law regarding deputies in the Congress.
The health of the world’s second-largest economy is at stake. As a key global exporter and a significant market for foreign firms such as Apple and Volkswagen, China’s prolonged property issues have dampened consumer and business confidence, affecting economic vitality. Compounding these challenges is a tariff war initiated by U.S. President Donald Trump, which has further complicated the situation.
Currently, China is hesitant to engage in major stimulus efforts. This year’s Congress began by announcing an economic growth target of “about 5%,” a benchmark analysts consider ambitious given the specific measures described during the Congress. Proposed initiatives include borrowing significant amounts to fund various projects, such as 300 billion yuan ($41.3 billion) in rebates to consumers trading in old vehicles and appliances for new ones. However, much of these funds will support the housing market and heavily indebted local governments.
Analysts interpreted the 5% growth target as a hint that more stimulus could be in the pipeline. Last year, the government took surprising actions to stimulate growth starting in September to reach targets set for 2024. Finance Minister Lan Fo’an assured journalists that the government has adequate resources to handle both external and domestic challenges.
President Xi Jinping is focused on revitalizing private businesses, which are crucial for growth and employment in China’s predominantly state-driven economy. Years of regulatory scrutiny have shaken entrepreneur and investor confidence. The Congress deliberated on a proposed law aimed at enhancing the business environment for private entities by regulating market access, financing, competition, and protecting property rights, though it was not put to a vote.
Neil Thomas, a fellow on Chinese politics at the Asia Society Policy Institute, highlighted Xi’s intentions to send a reassuring message to entrepreneurs, local governments, and regulators about the private sector’s importance. Private companies are expected to have increased access to loans and expanded financing options through bond issuance, according to Chinese Premier Li Qiang in the work report.
A significant aspect of future developments involves how aggressively President Trump will continue his trade war with China, among other nations. While China has diversified its export markets, the United States remains an essential trade partner. The more significant concern is not the tariffs themselves, but the health of the U.S. economy and its demand for Chinese products, noted Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis investment bank.
Since taking office, Trump has twice raised tariffs on Chinese imports, and China has shown no intention to yield. Commerce Minister Wang Wentao expressed a firm stance, stating that if the U.S. proceeds further along its current course, China is ready to resist until the end.
China’s Foreign Minister Wang Yi, commenting on Trump’s “America First” policy, warned that adopting a “my country first” approach could lead to a law-of-the-jungle mentality. He emphasized that a large country should honor international obligations and responsibilities, not prioritize selfish interests or wield its power to intimidate weaker nations.
The government, in its report, addressed what it considers unproductive “rat-race” competition, invoking the term “neijuan” or “involution.” Originally a buzzword among China’s younger workforce five years ago, it is now applied to companies and local governments. For instance, the proliferation of green energy firms has resulted in equipment surpluses and intense price wars that ultimately harm the industry.
Chinese tech executive Lei Jun, CEO of Xiaomi and a Congress delegate, explained to state media that firms’ strategies are similar, leading to harsh competition. Experts acknowledge the ambiguity of solutions, pointing out that government subsidies for green energy contributed to the problem by encouraging the startup boom.
Overall, the Congress highlighted significant domestic and international challenges. As China navigates its economy’s path forward, much will depend on decisions made in the coming months.
