China s parliament meets to shield economy from US tariff salvos

BEIJING – China’s Parliament begins its annual session on March 5 with officials under pressure to tilt their fiscal resources towards consumers to make the economy more resilient in the face of rising US trade tariffs and deflationary pressures.

Having reached its 2024 economic growth target of roughly 5 per cent only with a late stimulus push, Chinese Premier Li Qiang is expected to lay out a similarly lofty, but even harder to reach goal for 2025 in front of the National People’s Congress.

An escalating trade war with US President Donald Trump’s administration is threatening to crimp China’s economic jewel, its sprawling industrial complex, at a time when persistently sluggish household demand and the unravelling of the debt-laden property sector are leaving the economy increasingly vulnerable.

Mr Trump has also dangled tariffs at a long list of countries, including some which would consider themselves staunch US allies, threatening a decades-old global trade order that Beijing has built its economic model around.

Pressure has been building on Chinese officials to introduce policies that put more money into consumers’ pockets and reduce the world’s second-largest economy’s reliance on exports and investment for growth.

Mr Li is expected to announce a higher budget deficit of 4 per cent of gross domestic product and record debt issuance. Some of these resources will help fund a recently expanded consumer subsidy scheme for electric vehicles, appliances and other goods.

But economists have been urging Beijing to engineer a long-term restructuring of resource allocation in the economy with more profound measures that reimagine its taxation, land and financial systems to weave a stronger social safety net.

“With deflationary pressures becoming entrenched against the background of an unfavourable external environment... boosting domestic household consumption demand is a key priority,” said Cornell University trade policy professor Eswar Prasad