China ’s National People’s Congress extravaganza was a fine news-bad news event for international buyers.
Great, in that Xi Jinping’s Communist Party reassured the finance world that China plans to get very micro to mend its micro problems. Poor, in that Xi’s crew really needs to deliver on its plan commitments, lest China loses yet more reliability with international investors.
On the inside, the NPC prioritized reinvigorating personal businesses, level playing fields and shrinking the part of state enterprises for growth and employment. It also vowed to move past the governmental reprisals, including on technology, that originally sent buyers for the exits.
Team Xi sent a “message to entrepreneurs, but also to local governments and regulators, that the private sector ’s important and it ’s necessary, ” says economist Neil Thomas at the Asia Society Policy Institute.
More cheerful announcement came on Friday when finance, banking, central banks and other officials announced they plan to hold a March 17 press conference to describe measures to improve consumption, a signal that sent the CSI 300 Index to its highest level so far this year.
That’s the sub. On the mega, Xi’s government has often proved more skilled at talking the talk than walking the walk on the type of architectural changes many investors crave. Very often, Xi’s reform staff has overpromised and underdelivered.
Premier Li Qiang detailed the government’s fresh policy priorities in the group ’s monthly work record. Li said the latest Enemy “underscores our commitment to meet challenges head-on and wish hard to deliver. ”
Those difficulties include Donald Trump’s escalating trade war, which is imperiling China ’s ability to export its way to 5 % GDP growth, the NPC’s stated target for 2025. So far, Trump has imposed 20 % tariffs on Chinese products; he threatened to hit a 60 % cover charge while on the campaign trail.
Adding more industrial capacity to increase exports will likely experience diminishing returns as developing nations — especially Global South nations — began throwing up their own tariffs and trade barriers on cheap Chinese goods.
“The more intense the trade war, the more aggressively Beijing will add stimulus, ” says Thomas at Asia Society. “Nonetheless, debt concerns will likely deter a stimulus ‘bazooka, ’ and direct consumer stimulus remains unlikely due to ideological opposition and implementation hurdles. ”
One new measure is an expanded US$ 41 billion trade-in program for consumers and businesses involving autos, household appliances and business equipment. China will also roll out additional subsidies for new smartphones, home renovations and healthcare costs.
Beijing plans to issue an additional 4. 4 trillion yuan in local government special-purpose bonds. The debt will finance new infrastructure, purchases of land and unsold housing, and bring government contractors up to date on overdue payments.
Officials also will issue 1. 3 trillion yuan worth of ultralong special treasury bonds to support national security projects and 500 billion yuan in special sovereign bonds to recapitalize state-owned banks.
“It’s unclear how much of a jolt this budget will provide to underlying domestic demand and reflation efforts, despite the sizable rise in the deficit, ” says Jeremy Zook, top China analyst for Fitch Ratings.
China, Li said, will “move faster ” to stimulate domestic demand, policies and measures that may be more clearly articulated at the anticipated March 17 press conference. Significantly, Li said the government plans to make domestic demand the “main engine ” of growth.
If so, that will mean tackling near-record youth unemployment, shortfalls in social benefits and welfare, extreme market volatility, a property sector in crisis and households that reflexively save much more than they spend.
Herein lies the rub, though. China must drastically pick up the pace of reform just as Trump’s tariffs begin to slam global growth prospects. Weathering the storm will require bold steps to increase competitiveness and support the nation’s fast-rising tech sector.
As Morgan Stanley economist Robin Xing notes, China ’s “policy focus is to accelerate AI adoption and autonomous driving, while making gradual progress in restructuring housing and [local government financing vehicle ] debt. ”
Yet, it remains to be seen how quickly AI might boost total factor productivity and overall competitiveness. Until then, Xi can hope his 1. 4 billion people snap to attention and start spending despite the persistent lack of social safety nets to boost household confidence.
“The daily problems facing China ’s citizenry have become severe enough that the government was forced to acknowledge them before the NPC, ” says economist Jeremy Mark at the Atlantic Council. It’s “no small admission for a communist party whose propagandists normally offer a steady diet of hubris. ”
Mack says that Li’s reference to “weak public expectations” in his work report and the decision to spotlight the importance of consumption, “were a bow to public opinion in a country where the public normally has no way of expressing itself. ”
However, Mack adds, “Xi clearly remains deeply committed to his core economic policies — a point underlined on the eve of the NPC with the publication of a speech he delivered in December. While also acknowledging ‘consumption shortcomings, ’ he made clear that the highest priority must remain more world-class enterprises and leading technologies. ”
Xi’s speech, Mack adds, “also insisted that the government’s response to China ’s economic problems had already ‘boosted the property market, stock market, market expectations, and social confidence, ’ suggesting that China ’s paramount leader is skeptical about opening the taps too much for those struggling to make ends meet. ”
This buttresses the argument that Xi is prioritizing structural upgrades over tossing money at China ’s problems.
Carlos Casanova, senior Asia economist at Union Bancaire Privee, says that achieving the 5 % growth target for 2025 presents significant challenges. Beijing acknowledges that the previous year’s target was met thanks to outsized stimulus policy actions agreed by the Politburo on September 26.
“Absent this policy pivot, growth would have been slower, ” Casanova says. “Moreover, exports accounted for one-third of GDP growth in 2024, following a rebound ahead of expected US tariffs in the fourth quarter. Without similar drivers, the government will need to focus on enhancing domestic demand to address the growth gap. ”
To Casanova’s mind, the announcements made during the NPC “did n’t provide enough visibility on this front. ” Nor did Xi and Li offer a credible path out of the deflationary rut into which China threatens to fall.
Despite Beijing’s fiscal support efforts, says Capital Economics analyst Julian Evans-Pritchard, “the degree of easing is more modest than it might appear. ”
As such, he adds, “we remain skeptical that it will be sufficient to prevent growth from slowing this year, especially given the headwinds on the external front and the lack of a more pronounced shift in government spending towards support consumption. ”
The hope, though, is that Xi’s party steps up efforts to make good on the pledges he made last November. That’s when he told a ballroom full of top CEOs that China is again open for business – and ready to work with the US. “China is willing to be a partner and friend of the United States, ” Xi told an audience that included Apple CEO Tim Cook and Tesla CEO Elon Musk.
“If we regard each other as the biggest rival, the most significant geopolitical challenge and an ever-pressing threat, it will inevitably lead to wrong policies, wrong actions and wrong results, ” Xi said. He added that “no matter how the global landscape evolves, the historical trend of peaceful coexistence between China and the United States will not change. ”
Two months later in Davos, Li said “choosing investment in the Chinese market is not a risk, but an opportunity. ” Li stressed that “investing in China will bring huge returns and a better future ” and described the CEOs on hand as “participants, witnesses and beneficiaries of China ’s reform and opening up. ”
China, Li added, “stands ready to seriously look into and solve the difficulties and problems encountered by foreign enterprises ” operating in the country. “We will take active steps to address reasonable concerns of the global business community, ” Li said.
In the years since the market chaos of 2015, China opened equity markets ever wider to overseas investors, steadily increasing quotas for foreign funds. Beijing did the same with government bonds, which have since been added to benchmarks like FTSE-Russell.
Yet access to exchanges in Shanghai and Shenzhen often outpaces reforms needed to prepare China Inc for global prime time. Those include increasing transparency, boosting corporate governance building reliable surveillance mechanisms like trusted, not co-opted, credit rating companies.
To be sure, China has often succeeded by using its own playbook. Back in 1997-98, when developing Asia crashed, China opted against devaluing the yuan. Several times since the late 1990s, traders and analysts have predicted a credit-and-debt-fueled crash. Speculators pounced. Each time, China confounded the naysayers.
Whether China can beat the odds again depends on Xi’s ability to earn investors ’ trust. As the Chinese stock rout that erased over$ 1 trillion in valuation reminded in recent years, there are certain laws of gravity that still apply to economies transitioning from state-driven and export-led growth to services, innovation and domestic consumption.
It’s great that Xi and Li say they’re doubling down on moves to build a more stable economic system. But investors will require more than talk to bet big on China ’s trajectory in 2025.
Follow William Pesek on X at @WilliamPesek