China’s National People’s Congress (NPC) stated that domestic consumption will be a priority for 2025, acknowledging the weakness of domestic demand. It is unclear, however, if the announced measures will be sufficient to offset the global hostile geopolitical environment.

China’s NPC session, held last week, was awaited by markets with hope and anxiety. Hope because China’s economy is not in good shape. The 5% GDP growth recorded in 2024 was mostly driven by exports-led manufacturing while domestic consumption remained weak, the property market remained depressed, and the economy flirted with deflation. Facing 20% tariffs on its US exports, China requires urgent stimulus measures, fiscal more than monetary. In addition, the session was awaited with anxiety because markets have been disappointed in the past, and time is running short to turn the economy around.

Premier Li Qiang acknowledged China’s need to address “inadequate domestic demand, particularly insufficient consumption,” and aims to make “domestic demand the main engine and anchor of economic growth.” Among the measures meant to help boost consumption, the government has announced the raising of the fiscal deficit ratio to 4%, compared to 3% last year, and the issuance of ultra-long special treasury bonds totalling RMB300Bn (US$41.3Bn) to finance consumer goods trade-in programmes, such as replacement and renewal subsidies for cars, digital products, and consumer goods. Other measures include raising farmers’ pension payments and basic pension benefits.

Premier Li announced a 2025 GDP growth target of “around 5%”, an ambitious objective given current trade tensions. The inflation target was cut to 2% from last year’s 3%, indicating the recognition of the current deflationary environment.

Achieving technological self-reliance is one of President Xi Jinping’s key aims. Premier Li promised government support for the research and development of “core technology in key fields”, expanding the development and use of AI in smart manufacturing, new-energy vehicles, and robotics. China also announced a 7.2% rise in its defence budget this year—the same percentage as last year.

What does Project Blue take from these announcements?

• China recognises the urgency of the current situation and is finally taking concrete measures to stimulate consumption, dropping the fiscal deficit ratio to provide financing. A 4% deficit would be the highest in two decades.
• Reaching 5% GDP in the current geopolitical context will remain challenging, and we remain committed to our 4.5% projection, which will be monitored and revised over the year.
• China has reiterated its commitment to invest in major renewable energy projects—developing new offshore wind farms and large-scale clean energy bases that combine solar and wind farms, positive news for energy transition materials.
• However, the measures announced at the NPC session are not a big bang for commodities. Demand for copper and aluminium may benefit slightly, but with the property market remaining a concern, our 2025 steel forecast remains unchanged at 995Mt versus 1,005Mt in 2024.

To summarise, while we would typically evaluate the announced measures as positive, they may be insufficient to offset all the negative factors arising from an increasingly disrupted economic and geopolitical environment.