Xi’s Big Challenge Is Getting People to Spend, Spend, Spend
Mar 7, 2025
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John Liu, Bloomberg's senior executive editor for Greater China, provides insightful analysis on the pressing challenges facing China today. He discusses the ambitious 5% GDP growth goal amidst a crippling property crisis and weak consumer demand. Liu highlights how Xi Jinping's strategies to boost spending through public initiatives clash with the reality of high youth unemployment and external trade tensions, particularly with Trump's tariffs. Liu's expert perspective offers a deep dive into navigating a complex economic landscape.
China is prioritizing increasing domestic consumer spending through public investment despite facing significant economic challenges and high debt levels.
The ongoing U.S.-China trade tensions, particularly Trump's tariffs, complicate China's efforts to achieve its economic growth target and require strategic diplomatic adjustments.
Deep dives
China's Ambitious Economic Goals
The Chinese government has set an ambitious GDP growth target of approximately 5% for 2025, maintaining the same level as the previous year despite ongoing economic challenges. Premier Li Qiang highlighted that boosting domestic consumption is the top priority to help stimulate the economy. To achieve this, the government plans to increase public spending while allowing the general budget deficit to rise to its highest level in over three decades, suggesting a reliance on borrowing to sustain growth. However, the sustainability of this strategy remains uncertain, as overarching economic conditions continue to pose significant threats.
Challenges in Domestic Consumption
China's domestic consumption has weakened, contributing to a troubling economic cycle where citizens are reluctant to spend, leading businesses to lower prices in a bid to attract customers. Currently, consumer spending accounts for less than 45% of GDP growth, the lowest since 2006, indicating a significant gap compared to other developed nations where this figure typically ranges between 60% and 80%. As companies face shrinking revenues, there is less available to pay workers or hire new staff, leaving households with an increased sense of financial insecurity. This vicious cycle highlights the urgent need for effective policies to reignite consumer confidence and spending.
Impact of Global Relations on Economic Stability
The trade tensions between the United States and China, particularly under the scrutiny of tariffs imposed by the Trump administration, pose additional risks to China's economic growth outlook. While China's policymakers recognize Trump’s tough stance may complicate trade, they are also exploring opportunities to strengthen diplomatic ties with nations impacted by these tariffs. This examination of global relations suggests a multifaceted approach to mitigate the potential economic fallout from U.S. actions. Ultimately, achieving the 5% growth target will require overcoming both domestic hurdles and adapting to the complexities of international trade dynamics.
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.