China's top leaders tried to project confidence in the country's economy on Wednesday despite slowing growth, escalating the trade war with the US and increasing geopolitical uncertainty by the Trump administration.
The government is aiming to expand China's economy at “about 5%” this year, Prime Minister Li Qiang, China's highest-ranking official after Xi Jinping, said at the opening of the country's Rubber Stamp parliament annual session.
Li acknowledged that the economy faces many challenges and requires “difficult efforts” to achieve its goals. However, he put a positive note on the country's outlook. “The fundamental trends in long-term economic growth have not changed and remain unchanged. The Chinese economy's huge ships will continue to cut the waves and continue to sail steadily towards the future.”
The Beijing meeting, known as the National People's Assembly, is a strictly scripted political pageant that will run for several days, showing that XI plans to guide China through what is often described as “a major change that is not visible in the first century.”
XI's vision includes lifting China's technical capabilities and independence and strengthening its military capabilities to control the Asia-Pacific region. It focuses on strengthening the grip on power of the ruling Communist Party by making national security of all aspects of Chinese society a priority. Security has become tighter at the legislative meeting, bringing about 3,000 representatives to the people's convention, and police have been posted at several checkpoints near the venue.
XI and his top officials have been trying to restore faith in the economy. This has struggled to regain momentum after being hit by the pandemic and the crash of the housing market, and wiped out much of the wealth of many Chinese Chinese people. However, achieving a growth target of around 5% will be even more difficult than in the past few years due to the trade war with the US, which shows few indications of mitigation.
XI is stubborn about Washington, indicating that China must be treated as equals. He refused to succumb to our pressure, as did Canadian and Mexican leaders by getting engaged to Trump, after the US president first called for a 25% tariff on his country in January. Instead, China responded with retaliatory trade measures. The latest was announced Tuesday, targeting the US agricultural nation that was shaking wildly for Trump in last year's election. “We are ready to fight to the end,” a foreign ministry spokesman said.
The government said it would raise the deficit from its initial target of 3% last year to 4% of overall economic output in order to expand growth. Such a key policy shift shows the preparations to increase China's general borrowing, money that can be used to stimulate the economy.
But more than that, China needs households to start spending again to turn its wealth around. Consumer trust has been hit hard by the housing market crisis. In recognition of this, Beijing reduced its consumer price inflation target to 2%, bringing it to its lowest level in over 20 years. But those seeking signs of a bold solution on Wednesday remained disappointed to help households with more health insurance and retirement pensions.
China has long debated the truth behind the country's economic data by foreign economists, but has not missed growth targets since 2020, when the economy in 2020 was shrinking due to the community pandemic.
Under Xi, Beijing highlighted the superiority of the provincial sector, rattling entrepreneurs with private business crackdowns. However, in recent months, Chinese leaders, including Xi himself, have more willing to acknowledge the importance of private companies in driving economic growth.
Last month, XI held a rare meeting with business leaders, including Jack Ma, founder of internet giant Alibaba, who had been on the sidelines for four years for criticizing Chinese regulators. XI also praised technology as a major driver of development and praised the measures that would allow China to become vulnerable to pressure from the US. (To that end, the government also said it would support the development of advanced technologies such as artificial intelligence and autonomous driving, as well as the development of renewable energy.)
Analysts say China is more prepared for Trump than his first term.
This was highlighted on Tuesday when China announced that it would place tariffs of up to 15% on some U.S. agricultural products and imposed punitive trade measures on 15 American companies, including drone maker Skydio. They also added what they called “untrusted entity lists” to ten other American companies, preventing them from doing business in China.
The move responded to an additional 10% tariff on Tuesday on 10% tariffs on Chinese goods. The administration accused China of not doing enough to stop the flow of fentanyl and immigration to the United States.
“Beijing remains cautiously optimistic that the current trade war can ceasefire with Trump so that it doesn't escalate into a new, potentially much more expensive domain.” “At the same time, Beijing will advance its quest for an economy that is restored to technological superiority and pressure and forcing from the US.
But the trade war is just one aspect of China facing its second Trump presidency. He also weighs the options to impose a dramatic reversal of American foreign policy, overturning relations with historic US allies such as Canada, Mexico and Europe, and overturning relations with his country's longtime rival, Russia. China is also courting Europe, but is also strengthening its diplomatic interactions with Russia, and XI told President Vladimir V. Putin last week that he called on China and Russia as “true friends.”
At the same time, Beijing signaled that the economic downturn would not slow the country's military spending. China's military spending rose 7.2% in 2025, equivalent to about $246 billion, according to the financial budget report issued at the conference.
Last year, China's military budget also rose 7.2%. The country has not lost its record of annual increase in military spending over decades, even if economic growth slowed.
China's increased military spending funded the accumulation of advanced missiles, fighter jets, naval ships and submarines. Recently, China has bending its growing military reach by sending three warships to the seas near Australia and New Zealand.
Lin Ying-Yu, a professor specializing in the Chinese military at Tankan University in Taiwan, said: “What comes next, whether it's a new aircraft airline or space technology, would actually cost him a fair amount of money.”
you Contributed research from Beijing Amy Chan Chien I contributed a report from Taipei, Taiwan.
