Beijing sets ambitious 2025 GDP growth target

It's official: Beijing has set the 2025 GDP growth target at “around 5%.”

• That's the same as last year – and right in line with expectations.

Premier Li Qiang revealed the target in the annual Government Work Report (GWR), which he presented to the legislature (NPC) on Wednesday.

The target is ambitious: It will be much tougher to reach this year given the multiple headwinds buffeting the economy, most notably:

• A slumping housing market
• Record-low consumer confidence
• An escalating trade war with the US (and potentially the EU)

The GWR signaled that Beijing is up for the fight, committing to:

• Finally getting serious about boosting household consumption
• Massively ramping up government spending
• Loosening monetary policy

Tellingly, however, the GWR set this year’s consumer inflation target at 2%, the lowest on record.

• Since 2015, the inflation target has been 3%.
• This year’s lower target is official acknowledgment of China’s persistent deflationary pressures.

Even this target will be difficult to achieve: In the first two months of this year, CPI inflation rose just 0.5% y/y.

Get smart: If the government matches its policy pledges with concrete action, the economy should comfortably hit this year’s growth target.

• Concerted policy support would also buoy consumer confidence, rejuvenating animal spirits and creating a positive feedback loop as households spend more.

Get smarter: There are plenty of downside risks to growth this year.

• If Beijing falls short on execution, confidence will take another hit, further weakening the economy and undermining the government's credibility.