Xi Jinping to unveil stimulus plan at China’s NPC as economic recovery faces US tariff threats and domestic challenges

As President Xi Jinping prepares for China’s largest political event of the year, the National People’s Congress, the country shows signs of economic recovery. Key breakthroughs in artificial intelligence and a new embrace of private entrepreneurs have sparked a strong equity rally. However, looming tariffs from former President Donald Trump threaten to derail momentum, putting Beijing’s growth targets to the test.

Amid the uncertainty, China’s policymakers are expected to unveil bold fiscal measures, including an increase in the budget deficit, to combat the economic challenges posed by deflation, a property slump, and the ongoing trade war with the US. As inflation remains subdued and consumption weak, China’s leaders face the complex task of stimulating growth while navigating external pressures.

Thousands of delegates, including ministry chiefs and provincial leaders, will gather Wednesday in Beijing for the parliamentary conclave. According to most analysts surveyed by Bloomberg, officials will set a bullish growth goal of around 5%.

Almost two months into Trump’s new presidency, the world’s largest economies are on a collision course that makes it increasingly urgent for the Communist Party to unleash the spending power of its population. Unlike last year, there’s little chance Beijing can bank on a boom in exports, and leaders have instead vowed to prioritize expanding domestic demand.

China is poised to change its policy “quite a lot” this year, said Yao Yang, a professor of economics at Peking University, who cautioned the measures still might not be sufficiently bold.

“My first worry is the fiscal stimulus isn’t big enough, particularly when we consider local government debt,” he said. “Secondly, if China and the US cannot negotiate a settlement, the American government probably will increase tariffs. Then we are going to get into a tit-for-tat war. That’s going to be very bad.”

Household spending has been stubbornly weak as China’s real estate slump weighs down confidence and the income and job outlook remains bleak.