China sets 5 per cent growth target as Trump escalates trade war

In his keynote address, Premier Li Qiang set an ‘ambitious’ growth target and pledged ‘new combat capabilities’ in a budget delivered during rising tensions with the Trump administration.

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Beijing has set an economic growth target of “around 5 per cent” for 2025 and ramped up ­defence spending in a “rally around the flag” budget that was delivered as Chinese policymakers spar with the US in an ­escalating trade war.

Premier Li Qiang revealed the annual growth target in a keynote address called the “work report”, which was delivered on Wed­nesday in Beijing’s Great Hall of the People.

Budget papers also released on Wednesday show Beijing has increased the People’s Liberation Army’s budget by a nominal 7.2 per cent, continuing a decades-long military build up that has ­rattled many in the region.

The increase takes China’s ­official military spending to 1.784665 trillion yuan ($398bn) – about eight times the amount Australia spends on defence.

However, analysts believe China’s actual military spending is much higher.

“We will step up military training and combat readiness, speed up the development of new combat capabilities, and establish a framework of modern military theories with Chinese characteristics, so as to firmly safeguard China’s sovereignty, security, and development interests,” Mr Li said.

The Chinese Premier’s speech came after Washington and Beijing further escalated their tit-for-tat trade war, following US President Donald Trump’s decision to hike tariffs on Chinese imports by a further 10 per cent.

Beijing responded almost immediately late on Tuesday with a host of tariffs ranging from 10 to 15 per cent on American agricultural exports, ranging from wheat and corn to soybeans and beef.

Speaking with President Xi Jinping and his politburo watching from behind, Mr Li said China’s economy had faced “multiple difficulties and challenges” over the past year.

Without naming the United States, Mr Li said China faced ­ongoing challenges on trade ­because of a “severe external environment”.

But he said the “mounting external pressures” only confirmed the need to follow Mr Xi’s leadership.

“What we have achieved once again proves that under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core … we can prevail over any difficulty,” he said.

Mr Li’s speech was the centrepiece of the “Two Sessions” – simultaneous meetings of the National People’s Congress, China’s rubber stamp parliament, and the Chinese People’s Political Consultative Conference, an advisory body.

Beijing uses the political gathering, which involves almost 5000 delegates, to set policy goals for the year ahead.

China’s growth target was in line with analysts’ expectations.

Researchers at the Asia Society said the target was “ambitious” and noted international scepticism about Beijing’s claim that it met its 5 per cent growth target in 2024.

ANZ’s China economic team said the budget showed China’s “actual deficit” to GDP ratio was at its highest level in history.

Chinese policymakers are working increasingly hard to stoke economic growth, amid a historic property slump, weak consumer sentiment and strained local finances.

A Beijing-based steel analyst said the property sector was “still dropping in sales and prices”, which had caused knock-on pain for China’s steel industry, by far the biggest buyer of Australian iron ore.

“It is hoped that this year there will be no further decline,” he told The Australian.

Despite the economic challenges, Beijing boosted its investment in science and technology by 10 per cent as it seeks to close the gap with America and its partners in the West.

China’s propaganda machine has been revelling in the chaos Mr Trump has caused in the US-alliance system, which has proved a useful backdrop to the political meeting in Beijing.

In his speech, Mr Li repeated one of his leader’s favourite quotes: “Changes unseen in a ­century are unfolding across the world at a faster pace.”

Richard McGregor, senior ­fellow for East Asia at the Lowy Institute, said the US President had shifted Chinese political sentiment in Mr Xi’s favour.

“Trump is putting the Chinese economy under pressure, and by extension, Xi Jinping’s stewardship of it” Mr McGregor told The Australian.

“But in other respects, Trump is the best thing that Xi has going for him.

“If Xi can credibly portray ­himself as being in an existential stand-off with Washington, then all of his many domestic critics will be under pressure to rally around the flag rather than dispute anything the leader does.

“With such upheaval around the world, Xi will be intensifying his steady-as-she goes approach.

“That means sticking to a growth target of about 5 per cent and accelerating investment in hi-tech industries,” he said.