Recently, Chinese Premier Li Keqiang announced in the government work report of the National People’s Congress that the Chinese economy aims for a 5% GDP growth this year, creating over 12 million new jobs and maintaining basic international balance of payments. Experts believe that achieving these goals will be challenging as political propaganda might overshadow reality.
Premier Li Keqiang acknowledged the complex and severe challenges facing China over the past year, with significant external pressures and internal difficulties. The downward trend in China’s economic development poses serious structural challenges. Issues such as high youth unemployment rates, a stagnant real estate and stock market, foreign capital withdrawal, struggling businesses, high local government debts, significant decrease in income for the population, insufficient consumption, and difficulties in wage payments by some local governments have been evident.
Boosting consumption has been identified as a key focus in China’s economic agenda for 2025. However, economic stagnation has led to a sharp decrease in people’s income across various industries, contributing to a bleak economic landscape. Additionally, individuals who once invested heavily in real estate now find themselves with negative assets due to continuous declines in property prices. Under these circumstances, stimulating consumption becomes challenging.
Simultaneously, the United States has shifted its strategy towards China significantly, imposing a 20% tariff and separating from China entirely while initiating comprehensive measures against the Chinese government. The trade war and high-tech restrictions imposed by Trump have greatly weakened China’s trade export capacity, attractiveness to foreign investments, and international competitiveness.
Premier Li Keqiang’s economic targets for 2025, as outlined in the report, include a GDP growth of around 5%, an urban and rural surveyed unemployment rate of approximately 5.5%, creation of over 12 million new urban jobs, and a residential consumer price index increase of around 2%. The report also stresses the importance of boosting consumption, enhancing investment efficiency, and expanding domestic demand comprehensively.
Despite the ambitious goals set by the Chinese government, professionals have raised serious doubts. American economist David Huang believes that endeavors to boost consumption, improve investment returns, and expand domestic demand on all fronts face significant challenges and are unlikely to be realized.
Huang pointed out that high unemployment leading to reduced income, a stagnant real estate market, increasing uncertainty in the private sector’s economy, and excessive tax burdens on businesses and low social security for the population hamper consumer willingness and capacity. He criticized the temporary solutions like issuing consumer vouchers and deficit loans by the Chinese government, stating that the fundamental issues need to be addressed for sustainable consumption growth.
Regarding the stagnation in investment returns, Huang mentioned that China’s previous economic stimulus through extensive infrastructure projects has resulted in diminishing marginal returns, coupled with heavy local debts. Moreover, many infrastructure projects have reached a stage requiring maintenance and repair without substantial economic benefits, adding to financial pressures.
According to Huang, China’s current economic engine relies primarily on exports, particularly to European and American markets. With the potential loss or restriction in the US market, China may witness an increase in exports to Asia, Africa, and Latin America, but the bulk of profitable growth comes from European and American countries.
Premier Li Keqiang’s target to keep urban unemployment below 5.5% and create 12 million new job positions in 2025 was met with skepticism by Huang. He expressed doubts about the reliability of China’s official statistics and raised concerns over the accuracy of data collection methods, particularly regarding urban unemployment rates.
Huang criticized China’s categorization of “flexible employment,” highlighting quality concerns where those working only a few hours a week are considered employed, a classification that would be deemed unemployed or underemployed in Western countries. He also highlighted the impact of industrial relocation, the exodus of foreign enterprises, and the financial difficulties faced by private companies on exacerbating the employment crisis.
In recent years, China has strived to maintain a 5% GDP growth target, which is again forecasted for 2025 in Premier Li Keqiang’s government report. However, Huang emphasized the distinction between achieving a genuine 5% growth versus a statistics-based target, emphasizing the significant challenges in real economic achievement.
Huang underscored the ongoing collapse in China’s real estate market, impediments in exports, and the escalating local debt crisis as critical factors contributing to economic challenges. He pointed out the need for substantial tax reductions, increased household income, reduced government interference in business operations, and a shift towards economic policies prioritizing public welfare over political security.
The National Bureau of Statistics of China reported a $422.2 billion surplus in the current account in 2024, with a merchandise trade surplus of $767.9 billion, reaching a historic high, and a service trade deficit of $228.8 billion.
In response to these figures, a spokesperson for China’s State Administration of Foreign Exchange claimed that the international balance of payments continues to maintain basic equilibrium, a sentiment echoed by Premier Li Keqiang in the government report. However, analysts view these statements as leaving room for maneuvering amid retaliatory measures taken by the US, such as increased tariffs impacting China’s export profits.
Huang stressed the direct correlation between Trump’s tariff policies and the substantial reduction in China’s export profits and foreign exchange reserves, emphasizing the adverse effects on Chinese businesses and the overall economy. He concluded that achieving the stated goals of the Chinese government for 2025, including a 5% GDP growth, seems highly challenging amidst the prevailing economic difficulties.