China’s 2025 Two Sessions: Six Key Takeaways

1. Confidence in China’s Economic Growth Despite US-China Tensions

In line with the past two years, China set an annual GDP growth target of “around 5%.” While this target is necessary to achieve the government’s goal of doubling the size of China’s economy by 2035 from its 2020 level, economists nevertheless consider it ambitious. The International Monetary Fund, World Bank, and some major investment banks anticipate a 4.5-4.6% expansion in China’s GDP this year, citing weak domestic demand and rising trade tensions as the main impediments.

Commerce Minister Wang Wentao acknowledged these challenges but expressed strong confidence in China’s ability to reach this target. At an economy-focused press conference on the sidelines of the Two Sessions, he said that the target was set after “comprehensive research” and that the government has made “full and solid preparations to achieve it.” He also downplayed the impact of rising US tariffs, noting that Chinese exporters have diversified their markets since the first Trump presidency and that China’s technologically sophisticated exports are increasingly in demand globally.

To sustain growth amid internal and external challenges, the government has signaled a clear intention to increase spending. Adopting a “more proactive” fiscal policy for the first time in recent years, Beijing has raised the deficit-to-GDP ratio to a historically high 4%. Additionally, the total value of ultra-long special treasury bonds to be issued this year will rise by 30% to RMB 1.3 trillion and special local government bonds will increase by 13% to RMB 4.4 trillion. As in 2024, the government is likely to closely monitor economic performance throughout the year and introduce additional support measures as needed.

2. Boosting Consumption is The Top-Priority Task for 2025

Mirroring the senior leadership’s Central Economic Work Conference (CEWC) in December, the GWR ranks “vigorously boosting consumption” as the top task for 2025. The term “consumption” appears 31 times in this year’s report, reflecting concerns over sluggish consumer spending and weak confidence. Retail sales grew just 3.5% in 2024, down sharply from 7.2% in 2023.

The government pledged to address the root causes of weak consumption by boosting personal income, expanding employment, reducing financial burdens on low- and middle-income groups, and stabilizing the real estate market. These commitments are a positive signal but a concrete shift in consumer sentiment will likely be gradual, given the scale and complexity of addressing these issues and the time needed for policies to trickle through to consumption.

Commerce Minister Wang said immediate efforts will focus on the trade-in program and service consumption, such as tourism and sports. The trade-in program, which has so far focused on home appliances, consumer electronics, and passenger cars, will double its funding to RMB 300 billion (~USD 41.5 billion) and include more products, boosting spending on big-ticket items. Data from last year suggests the program drove consumer spending on included goods much faster than overall consumption growth, as retail sales of home appliances and audio-visual equipment surged 12.3% year-on-year.

3. Scientific & Technological Innovation Remains a Top Priority

The GWR designates developing new quality productive forces as the second major task for 2025, emphasizing support for emerging technologies such as biomanufacturing, quantum technology, embodied AI, and 6G telecommunications. The government expects the private sector to play a larger role in innovation. This priority was evident in President Xi Jinping’s February meeting with private sector leaders, which signaled a shift in the government’s attitude towards the private sector after years of heightened regulatory scrutiny.

The GWR also pledges support for “unicorn and gazelle companies” as well as SMEs that utilize advanced technologies. National Development and Reform Commission (NDRC) Chairman Zheng Shanjie announced a RMB 1 trillion national-level venture capital fund aimed at transforming scientific achievements into productive outcomes. Simultaneously, the GWR emphasizes modernizing traditional industries through digitalization and equipment upgrades. Artificial intelligence features prominently, with five mentions this year. The report highlights the government’s “AI Plus” initiative and commits support for the “extensive application” of AI models.

4. Pledges to Help Exporters Weather a Tougher External Environment

The GWR recognizes the importance of exports as a major economic driver. Accounting for nearly a third of total growth in 2024, net exports contributed their largest share in years. However, Commerce Minister Wang warned that “China’s foreign trade development faces a severe situation.”

Among the biggest challenges are new US tariffs. Since January, US President Donald Trump has imposed 20% tariffs on all Chinese imports and threatened additional measures, such as fees on Chinese-built vessels docking at US ports. Officials have also urged Mexico and Canada to match US tariffs. A diversion of Chinese exports to alternative markets could heighten tensions with Beijing’s other trading partners, including the EU.

The watchword in 2025 will therefore be “stabilizing” foreign trade. Beijing is expected to increase support to mitigate external pressures on exports. The GWR pledges expanded export credit insurance, improved financial services for exporters, and efforts to boost cross-border e-commerce. The government will continue to push for geographical diversification, including advancing negotiations on the upgraded ASEAN-China Free Trade Area and the China-Gulf Cooperation Council Free Trade Agreement.
The GWR also signals that action will be taken on production capacity and price competition, promising steps to curb “rat race competition” and enhance monitoring of production capacity. The NDRC report pledges to reduce steel output and promote “orderly development” in the electric vehicle, solar, and battery sectors, though details remain unspecified.

5. Doubling Down on Efforts to Attract Foreign Investment

In even more proactive language than last year’s report, the GWR pledges to “vigorously encourage” foreign investment and remain committed to opening up “regardless of changes in the external environment.” This stance reflects concerns over the 27% drop in foreign investment in 2024, compared to an 8% decline in 2023. Possibly in acknowledgement of the challenges of attracting new investments, the GWR places greater emphasis on reinvestments.

The report highlights measures to further improve China’s business environment for foreign enterprises, reaffirming commitments from February’s “Action Plan to Stabilize Foreign Investment in 2025,” such as enhancing pilot free trade zones and ensuring equal treatment for foreign-funded enterprises. Foreign companies will receive equal access to production factors, license applications, government procurement, and standard-setting processes. Special emphasis is given to accelerating policies for the Hainan Free Trade Port and establishing separate customs operations.

Encouraged sectors for foreign investment include telecommunications, healthcare, education, cultural sectors, and now “internet-related” industries. Additionally, December’s updated “Catalog of Encouraged Industries for Foreign Investment,” released by the NDRC and Ministry of Commerce, will guide investments in advanced manufacturing, high technology, and environmental protection.

Efforts to attract foreign talent will also continue. Commerce Minister Wang announced that the government will optimize visa policies and enhance processes for entry, accommo-dation, and payment for foreigners. Support and services for overseas talent will also be improved.

6. China is Committed to Global Stability but Will Retaliate Against Trade Barriers

Unsurprisingly, US-China relations dominated the Two Sessions’ press conference on foreign affairs. Answering multiple reporters’ questions, Foreign Minister Wang Yi presented China as a stabilizing force on the global stage, in stark contrast to the current US administration. He said that “major powers” should not be “profit-driven” and “bullying the weak,” while emphasizing that China will “provide certainty to this uncertain world” by promoting multilateralism, peace-making efforts, and global development.

Regarding the recent US tariffs, Foreign Minister Wang reiterated China’s stance that the abuse of fentanyl in the US is a problem for the US to resolve and highlighted the substantial assistance China has already provided. While emphasizing the “broad space for cooperation” between the two countries, he also warned that China will “definitely take countermeasures in response to arbitrary pressure.”