China Boosts Stimulus to Shield Economy from Historic Shifts:

On Wednesday, China revealed extra measures to stimulate the economy, suggesting that there is more stimulus spending in an effort to prop up consumption and safeguard the economy’s journey towards this year’s growth target of around five percent, which is fairly modest for China, during the ongoing trade tussle with the US.

During his keynote address, Li remarked that, ‘Unprecedented changes for the world are occuring and they are happening at a breakneck speed.”

Li said, "China may be at greater risk in regard to foreign trade, science, technology, and the rest of the world because the diplomatic environment is becoming more complex and more severe."

The conflict with the American government under Trump threatens to hurt China’s economy which is already in trouble with low household spending and the decline of the heavily indebted housing market. The President has also threatened tariffs on a large number of nations, including some that happen to be traditional allies of the US, endangering a global trade system advanced by China for several decades.

There is mounting pressure for Chinese officials to formulate policies that increase disposable incomes in an effort to curb deflationary tendencies as well as decrease the reliance of the world’s second largest economy on investment and export for growth. This was also clear in Li’s speech, who took a much more supporting stance on consumption than in previous years, some analysts stated while noting less focus on “new productive forces,” which is China’s short-hand for pouring funds into advanced manufacturing and technological development.

“For the first time, boosting consumption has been elevated to the top priority among 2025’s major tasks, displacing technology from its usual leading position,” Tilly Zhang, a technology analyst at Gavekal Dragonomics, said.

"It's not so much a change from the past industrial policy, but a shift toward a more equally distributed" macroeconomic policy emphasis, Zhang explained.

Li, while outlining key economic objectives for 2025, said the employment “consumption especially is slow” acknowledging “the level of job opportunities and income growth stagnation is having an impact.”

Li has further added that the capital of ultra-long special treasury bonds will increase to 1.3 trillion yuan ($179 billion) from 1 trillion yuan in 2024. This bonds issuance will be added to this year’s plans. Local authorities will be permitted to issue 4.4 trillion yuan in special debt, which is higher than 3.9 trillion yuan.

On the other hand, Baiijng intends to spend 500 billion yuan on the special debt to recapitalize major state banks.

According to analysts, they seem to suggest that during this responses period government officials will not make changes to their policies which gives them some reward later in the year.

"By the looks of it, policymakers expect to incur losses from the package and gain from a stimulus," said Larry Hu, chief China economist at Macquarie.

“For this reason, it makes sense that these officials do not want to lay their cards out at the present time.” He continued, “There are effects that need to be dealt with from the war, so there is no space for a March stimulus act.”

CONSUMER PLEDGES

Funds that have been presented by the NPC will be used to increase the recently expanded electric vehicles, appliances, and other goods subsidization schemes by 300 billion yuan.

The percentage of China's household expenditure is less than 40% which is about 20% lower than the global average. On the other hand, investment spending is 20% higher than average.

Li made a commitment to bridging the gap and making reforms that will enhance local government revenue in the hopes of consuming more. However, it was unclear what time frame he had in mind.

The changes to welfare benefits can be described as anemic at best.

Pensioners, who are typically farmers, will see a benefit with the base pension being increased by 20 yuan to 143 yuan, alongside per capita Medicare subsidies increasing by 30 yuan and basic healthcare service subsidies increasing by 5 yuan.

Li has also pledged support for changes aiding in child welfare and elder care, without elaborating, as a nod to China's growing demographic issues.

'THEN ANOTHER 10%'

Producers in China, with poor domestic dmeand and progressing economies in the US which imports over 400 billion worth of Chinese goods, are scrambling to find secondary export destinations simultaneously.

The fear is that this would escalate price competition, further reduce profit, and increase the possibility of more politically motivated protectionism against Chinese goods in these new markets.

The US imposed an additional 20 percent tariff on Chinese goods, with the latest shoulder 10 percent adjustment made on Tuesday. This action provoked retaliation from Beijing.

“We are concerned that they keep increasing the tariffs by 10 percent increments ad infinitum," said Dave Fong, who manufactures stationery, teddy bears, consumer electronics, and school bags in China. “That is a tremendous concern.”

Even though China’s growth rate reached five percent last year, it was largely unnoticeable on the streets. This is in part due to not without reason China's trillion dollar trade surplus, as many people are lamenting job and income stability due to employers slashing prices to remain competitive globally.

According to Andrew Xia, chief economists at Shangshan Capital Group, This increases the surplus exponentially, however, “this is no longer a suitable approach. To achieve growth, we need to shift focus towards internal consumption.”