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A crippling property crisis, mounting debt, weak consumer spending… and now a trade war. Despite the headwinds, China has set an ambitious economic growth goal of about 5% this year.

On today’s Big Take Asia podcast, host K. Oanh Ha speaks to Bloomberg’s John Liu about how Xi Jinping intends to meet the target, and how Trump’s tariff war might sabotage his plans.  

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Further listening: 

China’s New Game Plan For Dealing With Trump TariffsXi Has Embraced China’s Tech Titans Once Again. Will It Last?

Watch, from Originals: Can China Avoid Japan’s Lost Decades?

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Here is a lightly edited transcript of the conversation:

K. Oanh Ha:  This week, thousands of Chinese lawmakers are gathering in Beijing for the annual meeting of the NPC – the National People’s Congress. 

John Liu: The National People’s Congress is China’s parliament. It reads, drafts and passes laws. 

Ha: John Liu is Bloomberg’s senior executive editor for Greater China, based in Beijing.

Liu: The number one thing that happens at the congress is on the first day. China’s premier gives what is the equivalent to the state of the nation address for China. He comes out and says how the country is doing, how it did in the past year, and then he lays out some very important targets for the coming year.

Li Qiang : I’ll now report to you on the work of the government for your deliberation and also for comments from…

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Ha: For 2025, Beijing set an ambitious GDP growth target of about 5% and Premier Li Qiang declared that “vigorously boosting consumption” is the government’s top priority.

To help ramp up domestic demand, Beijing plans to expand its public spending – by borrowing at a record level. The government raised the general budget deficit to around 4% of GDP – the highest level in more than three decades. But it’s unclear whether that kind of stimulus will be enough to help the Chinese economy weather the storm ahead. And then of course, there’s the wild card…

Liu: China’s economy is in this really awkward position at the moment.  Property is struggling. Domestic consumption is weak. The only good thing about the economy has been exports and now that’s in real danger because of Donald Trump and because of the tariffs that the United States is imposing. So going into the future, the question is, what can China do to overcome all these challenges? And the problem is, there isn’t a solid, guaranteed solution.

Ha: Welcome to the Big Take Asia from Bloomberg News. I’m Oanh Ha. Every week, we take you inside some of the world’s biggest and most powerful economies, and the markets, tycoons and businesses that drive this ever-shifting region. Today on the show — Beijing plans to get people to spend, spend, and spend – but how? And will Trump’s trade war get in the way of those efforts? 

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Ha: On Wednesday, Premier Li Qiang kicked off the National People’s Congress with China’s 2025 government work report. It reviewed the health of China’s economy, and laid out a policy roadmap for the coming year. Bloomberg’s John Liu and his team have been closely reporting on what’s coming out of the meetings this week.

John, what’s the biggest thing you were watching out for in the government report this year? 

Liu:  So the three things we were really keen on finding out were one, what was the GDP target going to be for 2025. They announced the target of about 5%, which is the same as it was for 2024.

Ha: Now, keeping the country’s growth rate level might not sound like a big deal to an outsider, but the Chinese economy is facing serious headwinds right now. John says just how serious those headwinds are, and how difficult it will be to reach that goal was reflected in another number that was released this week: the borrowing threshold –

Liu:  They were going to expand the budget deficit for the central government to about 4% of GDP. That’s the biggest that it’s been since 1994, since they had some major changes in how they calculate fiscal deficits. And so it’s really the biggest on record. What that says, though, is they’re gonna spend a lot more money to have the same growth they had in 2024. So they’re spending a lot more money to basically stay in place. So that’s actually not a very optimistic signal for the rest of the year.  

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Ha: Consumption — people buying dishwashers or going out to restaurants — made up less than 45% of China’s GDP growth last year. That’s the lowest since 2006, and it excludes the pandemic year of 2020. In most developed economies, that number would be typically between 60% to 80%. Basically, people in China are feeling kinda broke right now, so they’re not spending as much, as fast. And this creates a vicious and dangerous cycle.

Liu: People are just not willing to spend, and that has resulted in companies needing to compete more aggressively to get business. And mostly they’ve been doing that by cutting prices. And so if companies are cutting prices, they have less money that they’re bringing in that they can then give to their workers that they can use to hire more workers, and that results in households feeling even more uncertain about the future, and it motivates people to save even more and to spend even less. It’s a very vicious and very dangerous cycle. 

Ha: To achieve the 5% growth target, the Chinese government has a laundry list of issues to overcome. Some are long term, like the country’s aging population, which is putting pressure on an already strained pension system. But others are more pressing. Like the property market. The real estate market used to be one of the country’s biggest growth drivers, but it’s been in a slump for the last several years, and it remains deep in trouble today. 

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John, it sounds like the real estate crisis has affected almost every region of China, and certainly every level of society. How are local governments then dealing with that? 

Liu: Many local governments around China are very indebted. They borrowed a lot of money to build infrastructure over the last decade or so, and now as economic growth slows, they’re finding it harder to generate tax revenue from those infrastructure projects to pay them off. And so as a result, there’s less money to go around, they have to pay the interest on those borrowings. That means they have less for new projects, they have less potentially to pay government workers to provide public services. And so the central government, the plan has been for the central government to borrow and then to give that money over to the local government to pay off the debt. And so basically you’re transferring the debt load from the local level to the central level. 

Ha: And also on the government’s list of priorities: Turning around a sluggish job market.

Liu: So the job market, I think the pain point that has been most pronounced is with youth unemployment. There was even a period when they stopped publishing the data for youth unemployment because it was so high.  In the summer of this year, we are going to get a record number of new graduates hitting the employment market, and so that’s going to add additional pressure on the government to create jobs. How they go about doing that, I think, it looks like right now they are putting an emphasis on private enterprise. And if you look at the data, the vast majority of jobs, especially in Chinese cities, come from the private sector. And so it looks like that the government’s main push there is to try and reduce regulation, to try and reduce the amount of scrutiny on private enterprises. And hopefully that translates into a more robust sector and more jobs.

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Ha: I mean the private sector does seem to be something of a point of light for China’s economy. We’ve certainly seen some big gains made in the last year right particularly in tech. You’ve got DeepSeek on the AI front, you’ve got tech giant Huawei surprising people with their phones. And that seems to bode well for domestic consumption, which is a big target for the Chinese government, right?

Liu: So I think if China, as it has proclaimed at the NPC, that it wants to make boosting domestic demand the number one priority, if it can do that, that would actually be very helpful for domestic innovation I think, because what you would see is companies here in China being able to potentially raise prices, having more customers, and that would in turn, results in greater profitability, which means they have more to invest in R&D.

Ha: Now John, is there anything that’s going well in China’s economy? 

Liu: I think that the stability in the housing market that we’ve seen in the last couple of months is very encouraging. I think that the AI innovations, the breakthroughs that we’ve had with DeepSeek, even with Tencent and Alibaba introducing their own large language models, that’s helped produce a lot of confidence. I think when the stock market goes up, as it has because of those innovations, that leads people to feel more confident about the future, and maybe they think, you know what, I’ll go and have a nice dinner out. I’ll buy a nice bag. I’ll splurge on something. And if enough people do that, it could start to turn things around.

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Ha: Another bright spot has been exports. About a third of China’s GDP growth came from net exports last year. And what could possibly go wrong? 

Donald Trump: We have been ripped off for decades by nearly every country on earth and we will not let that happen any longer…

Ha: That’s after the break. 

Ha: As Premier Li wrapped up his work report in the Great Hall of the People in Beijing, President Trump, on the other side of the world, was getting ready to address Congress in Washington DC. In his first speech to both chambers since returning to office, Trump defended the use of tariffs –

Trump: Whatever they tariff us, other countries, we will tariff them. That’s reciprocal, back and forth. Whatever they tax us, we will tax them. 

Ha: John, how do you think Trump’s speech to Congress might have been received by Chinese leaders?

Liu: In Beijing, if you talk to policymakers, there is a broad assumption amongst them that Trump is looking for a deal. That’s reinforced by when President Trump talks about how great a relationship he has with President Xi Jinping. And so I think when Chinese officials hear President Trump telling Congress these things about more tariffs, more taxes, all of this stuff, I think they take it in stride and they’re trying to figure out what they can do to get the best deal they can and what President Trump wants.

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Ha: Do you think with these tariffs that we’ve seen so far, this trade war could escalate? Like it did in 2018?

Liu: I think the officialdom in Beijing expects things to get more heated. But I think Beijing is sort of balancing that with the the damage that President Trump is causing to America’s relationship with other countries, Canada, Mexico, Europe, the global south, and I think Beijing sort of viewing it in a more holistic sense in that, yes, all these tariffs on Chinese goods are going to hit the economy and that is going to have a negative impact. But at the same time, maybe all of these actions by the Trump administration undermining the American partnerships and relationships that it has with countries around the world, maybe that creates more space for China to actually strengthen its trading relationships, links its diplomatic relationships with all these other countries who have been distanced by the Trump administration. 

Ha: Well, that would be a smart approach, right? When one door closes, you try to look for others. Is there a risk there that US tariffs, if they continue, if they’re piling on, could that dent that 5% growth target? 

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Liu: I think it certainly could. When those tariffs get high enough, any advantage will be taken away. And so, you know, at a high enough rate, it will do real damage to Chinese exporters and that will have a real impact on the economy in turn. What rate that is I think it’s it’s hard to theorize, but I would expect Beijing to be ready to provide more support as those tariffs go up.

Ha: So with all that we’ve talked about, the challenges at home and beyond, is China’s growth target of 5% achievable? 

Liu: The 5% target for GDP to me, is a relatively pessimistic target. It’s in combination with the fact that they’ve also pledged a record amount of deficit spending. And so China is having to spend more to stay in place. That to me suggests the government is looking around the world. It’s looking at what the United States is doing. It’s looking at what’s happening in Europe. And it’s thinking this year is going to be a tough year and they’re trying to be realistic about what they can get done. I think they didn’t want to lower the target because it would have sent, I think, the wrong signal to bureaucrats around the country, that maybe they don’t have to work as hard. They didn’t have to try as hard. It would have also sent the wrong message to financial markets in terms of what to expect, how ambitious, how much effort the government is going to put into making the economy better again, reviving growth again. And so it sort of is an acknowledgment of the challenges, but also trying to show that the central government is up to the task of trying to tackle those challenges.

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