China aims to maintain 5% GDP growth in 2025 despite looming Trump tariff threats

[WORLD] In a bold move that underscores China's economic resilience, the world's second-largest economy is poised to maintain its ambitious growth target of "around 5%" for 2025, despite looming threats of increased tariffs from a potential second term of Donald Trump as US president. This forecast, made by Zhang Ming, a prominent economist and deputy director of the Chinese Academy of Social Sciences' Institute of Finance and Banking, highlights China's confidence in its ability to navigate complex global economic challenges.

The Trump Factor: Tariff Threats and Economic Implications

The specter of Donald Trump's return to the White House has cast a long shadow over global trade relations, particularly concerning US-China economic ties. Trump's campaign promises include imposing a staggering 60% tariff on Chinese goods, coupled with a 10% blanket tariff on all imports. Such measures, if implemented, could potentially trigger a significant trade shock, especially impacting China's export-driven sectors.

Zhang Ming acknowledges the potential negative impact of these tariff threats on China's export growth in 2025. "The tariff shock brought by Trump's inauguration will have a significant negative impact on China's export growth in 2025," Zhang stated in an article published on his WeChat social media channel. This concern is not unfounded, given that exports account for approximately 20% of China's total gross domestic product, with the United States being one of its largest trading partners.

China's Economic Strategy: Resilience Through Stimulus

Despite these challenges, China's economic policymakers appear undeterred. The decision to maintain the 5% growth target reflects a strategic approach to economic management that balances external pressures with internal stimulus measures. Zhang Ming suggests that while the potential trade shock may slow overall growth in early 2025, China's economy is expected to gain momentum later in the year, ultimately achieving the annual growth target.

This optimistic outlook is rooted in Beijing's willingness to accelerate stimulus support as needed. The Chinese government has consistently demonstrated its ability to deploy targeted economic measures to counteract external pressures and maintain stable growth. These measures could include fiscal stimulus, monetary policy adjustments, and structural reforms aimed at boosting domestic consumption and reducing reliance on exports.

The Global Context: Trade Wars and Economic Interdependence

The potential escalation of trade tensions between the US and China underscores the complex interdependence of the global economy. Trump's previous term saw the initiation of a trade war with China, resulting in tariffs of up to 25% on various Chinese goods. The Biden administration has largely maintained these tariffs, indicating a bipartisan consensus on the need to address trade imbalances with China.

However, the proposed 60% tariff represents a significant escalation that could have far-reaching consequences not only for China but for the global economy as a whole. Such measures could disrupt global supply chains, increase consumer prices in the US, and potentially trigger retaliatory actions from China and other trading partners.

China's Economic Transformation: From Export-Driven to Consumption-Led Growth

China's ability to maintain its growth target in the face of external pressures is partly due to its ongoing economic transformation. The country has been gradually shifting from an export-driven model to one that emphasizes domestic consumption and innovation-led growth. This transition, while challenging, provides China with greater resilience against external shocks.

Zhang Ming's forecast suggests that China's policymakers are confident in their ability to manage this transition effectively, even in the face of potential trade disruptions. By focusing on stimulating domestic demand, advancing technological innovation, and promoting high-quality development, China aims to create a more balanced and sustainable economic model.

The Role of Stimulus: Balancing Growth and Stability

China's approach to economic stimulus has evolved in recent years, moving away from broad-based measures towards more targeted interventions. This strategy allows policymakers to address specific economic challenges without overheating the economy or exacerbating existing imbalances.

In the context of potential trade shocks, China may deploy a combination of fiscal and monetary policies to support growth. This could include:

• Increased infrastructure investment to boost domestic demand
• Tax incentives for businesses, particularly in sectors affected by tariffs
• Monetary easing to ensure ample liquidity in the financial system
• Support for innovation and high-tech industries to enhance competitiveness

These measures, carefully calibrated to respond to evolving economic conditions, demonstrate China's commitment to maintaining stable growth while navigating external challenges.

Global Implications: Beyond US-China Relations

The maintenance of China's 5% growth target amid potential trade disruptions has significant implications for the global economy. As the world's second-largest economy and a major driver of global growth, China's economic performance has ripple effects across markets worldwide.

A resilient Chinese economy could help stabilize global growth, particularly in emerging markets and developing economies that have strong trade ties with China. Conversely, any significant slowdown in China's growth could have adverse effects on global commodity prices, trade flows, and financial markets.

Challenges and Opportunities: Navigating the Path Forward

While China's economic outlook remains positive, significant challenges lie ahead. The potential for escalated trade tensions with the US is just one of many factors that could impact China's growth trajectory. Other challenges include:

• Managing debt levels, particularly in the real estate sector
• Addressing demographic pressures from an aging population
• Continuing the transition towards a more innovation-driven economy
• Balancing environmental sustainability with economic growth

However, these challenges also present opportunities for China to accelerate its economic transformation, enhance its technological capabilities, and strengthen its position in global value chains.

China's determination to maintain its 5% GDP growth target for 2025, despite the threat of increased US tariffs, reflects confidence in the resilience and adaptability of its economy. As Zhang Ming notes, "The potential trade shock may slow overall growth in early 2025, but China's economy is expected to pick up momentum later in the year to achieve the annual growth target".

This outlook underscores China's strategic approach to economic management, balancing external challenges with internal stimulus measures. While the path ahead may be fraught with uncertainties, China's economic policymakers appear prepared to navigate these challenges, maintaining stable growth and continuing the country's economic transformation.

As the global economic landscape evolves, the interplay between US-China relations, trade policies, and economic growth will remain a critical factor shaping the future of the world economy. China's ability to maintain its growth trajectory in the face of potential disruptions will be closely watched by policymakers, investors, and economists worldwide, offering valuable insights into the resilience of the global economic system in an era of increasing uncertainty.