The prospect of punishing new U.S. tariffs will hang over the deliberations at China's highest-level economic meeting when the Central Economic Work Conference of the Chinese Communist Party convenes for its annual session next month.
A key function of the meeting will be to set the nation’s growth target for 2025, a task made more challenging by the prospect of tariffs that could stunt the crucial export sector.
U.S. President-elect Donald Trump threatened repeatedly during his election campaign to swiftly impose a 60% tariff on Chinese-made goods. He wrote on his Truth Social account late Monday that he will impose “an additional 10% Tariff, above any additional Tariffs, on all of [China’s] many products coming into the United States of America.”
Most of the Chinese government advisers interviewed for a Reuters report this month recommended that Beijing maintain an economic growth target of 5.0% for next year, the same target as 2024.
Some said the country would have to launch stronger fiscal stimulus measures to offset the impact of new U.S. tariffs after Trump takes office in January.
Cai Shenkun, an independent commentator in the United States, told VOA Mandarin that Beijing’s “5% target” is clearly based on political necessity, rather than a market perspective.
After securing an extraordinary third term as president last year, Chinese leader Xi Jinping "will have to give the CCP an explanation and a vision,” Cai said. “He must make a good gesture. If he does not maintain the 5% target, his ruling position will be greatly threatened.”
Si Ling, a financial scholar in Australia, said in a phone interview with VOA Mandarin that if China wants to achieve its goal of doubling the size of its economy from 2020 to 2035, the annual economic growth rate must reach 4%.
“China has taken into account the uncertainty factors, like external shocks when Trump pledged to impose high tariffs. China must face the sudden decline in GDP growth,” said Si.
Reuters reported last month that China's economy is likely to expand 4.8% in 2024, missing the government's 5% growth target, and could slow to 4.5% in 2025.
Si said the growth of China's current GDP is dependent on exports and investments. If Trump fulfills his promise to impose high tariffs on Chinese goods, the impact on China's economy will be profound, he said.
“China's advantages in industrial products exports, brought by high state subsidies, will be completely wiped out due to high tariffs," Si said. "Can the domestic market digest the industrial products intended for export? Many of these industrial enterprises have already begun to reduce their production scale. This means more people will lose their jobs.”
Local debt and real estate woes
Independent commentator Cai warned that overreliance on stimulus measures may exacerbate local government debt problems.
“Private capital does not dare to invest anymore. State-owned enterprises can no longer play the role of investment pioneers," Cai said. "‘Maintaining the 5% target’ means printing a lot of cash, pouring it into the market, issuing a lot of treasury bonds and increasing the fiscal deficit. This is the only way. But it will have a great negative impact on the stability of the RMB currency value.”
A new wave of property market challenges will likely occur in the next 10 years, Cai said.
“In the past, people saw property as a means of asset appreciation or value preservation. Now the future housing market looks dark to everyone. If we continue to build houses, who will buy them? In the end, it may only lead to an avalanche-like bubble, which will burst completely."
Kristalina Georgieva, managing director of the International Monetary Fund, said last month that unless China's economy shifts from an export and investment-driven model to a consumer demand-driven model, its economic growth may slow to “well below 4%.”
