(Bloomberg) –As U.S. tariffs reorganize supply chains and Donald Trump lurches from one military campaign to another, China has offered its response to a more volatile world: staying the course on its own soil.
Continuity marked Prime Minister Li Qiang’s speech to parliamentarians on Thursday, in the country’s most high-profile political meeting since the US and Israeli attacks on Iran. The growth target was slightly reduced, fiscal spending remained practically the same as last year and the position on Taiwan did not undergo major changes. China even reduced military spending, despite the escalation of the war in the Middle East.
What was left unsaid was almost as remarkable. There was no direct mention of Trump’s latest actions, as is customary at carefully choreographed Communist Party events planned months in advance. Investors hoping for broad economic stimulus were disappointed. There has also been no sign that China plans to reduce the record trade surplus that has alarmed officials from Washington to Brussels.
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“The key decision makers know that we are in a very turbulent time. For the Chinese economy, it is critical to remain stable,” David Li Daokui, an economist who regularly advises Beijing policymakers, told Bloomberg TV. “Stability is the number one priority.”
Chinese shares traded on the domestic market closed the day higher, with the CSI 300 index rising 1% and the technology-focused ChiNext index rising 1.7%. The moves were more moderate compared to the broad rally in Asia following a widespread improvement in risk appetite.
The authorities’ pragmatic approach preserves their ability to implement more stimulus if geopolitical tensions rise as a growing conflict in the Middle East rattles the global economy.
Disruptions in the Strait of Hormuz — a narrow waterway through which about 20% of the world’s oil supply passes — could cause energy prices to soar. With China’s economy more dependent on exports than in recent decades, a slowdown in global trade could pose a significant drag on growth.
“The external environment for China’s economic development this year has become more complex and volatile, and uncertain and unpredictable factors are likely to exceed expectations,” said Shen Danyang, a State Council official who oversaw the drafting of the government’s work report. “Proposing a goal based on reach aims to leave room for maneuver.”
At a news conference on Thursday, Shen pointed to relatively low levels of public debt as evidence that Beijing has room for more borrowing and public spending. The central bank, which has cut interest rates in 2025 less aggressively than in any of the previous four years, also has scope to reduce borrowing costs, although fiscal spending is expected to be the main driver.
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Officials are weighing uncertainties such as global oil prices, Trump’s visit to China and the speed of the economy’s growth in the first quarter, said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group Ltd. “They will be watching these developments closely.”
The Republican leader is expected to arrive in Beijing on March 31 for a summit with President Xi Jinping, which aims to stabilize relations between the world’s main economies. After the Supreme Court struck down Trump’s emergency tariffs, the possibility of new American tariffs looms — something trade negotiators will likely discuss at a meeting scheduled for next weekend in Paris.
Space to breathe
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A more moderate growth target gives authorities leeway to address deeper structural problems. Among the main ones, weak consumption and excess industrial capacity stand out, long-standing problems that fuel deflation and affect the economy’s long-term prospects.
Plans to address these problems remain vague, even as the government’s tone changes. In a preliminary proposal for the next five years, authorities have promised to gradually raise the minimum wage, a firmer stance compared with the previous period, which could boost spending and combat overwork.
They also promised to crack down on “devolution” — a term for the kind of excessive competition that has spread across industries, from electric vehicles to solar panels. Proposed solutions range from capacity limits and price controls to industry self-regulation. The diverse set of tools indicates that policymakers recognize there is no one-size-fits-all solution, especially when they are also trying to protect jobs.
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When it comes to rebalancing the economy and reducing dependence on exports, options have been slim, meaning China’s record trade surplus is likely to persist despite growing international pressure.
“The main drivers of growth in 2026 and 2027 will likely continue to be investment in manufacturing and external demand,” said Sheana Yue, senior economist at Oxford Economics. Household consumption will likely “gain in importance as the effects on income and wealth only strengthen later in the decade.”
Another constraint is Beijing’s strategic focus on high-tech manufacturing, which funnels resources into building industrial capacity rather than meeting domestic demand. The rapid rise of AI has further intensified this pressure, as the Communist Party leadership sees mastery of cutting-edge technology as a key weapon in its rivalry with the US.
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In the most recent five-year plan, policymakers noted changes that include “an accelerated new round of technological revolution” and asserted that China “possesses many advantages in proactively managing international space and shaping its external environment.”
Policymakers also called for “decisive breakthroughs” in technologies such as semiconductors, industrial machinery and advanced materials. “Extraordinary measures” will be used to reinforce China’s capabilities in areas of strategic dispute, according to the document.
The central government is investing money in this task. The budget for science and technology spending foresees a 10% increase this year to 426 billion yuan ($62 billion), faster growth than the 7.1% increase in 2025.
Digitizing the economy with AI has taken on an even higher priority in the plan than expanding the domestic market.
“Technology and self-reliance still come first,” Societe Generale SA economists including Michelle Lam wrote in a report. “Consumption remains a medium-term ambition with few new tools to boost it.”
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