China’s economic ambitions are getting a supersized stimulus boost. Beijing unveiled its most aggressive fiscal package in over a decade, targeting ~5% GDP growth for 2025 while raising its budget deficit to a record 4% — up from 3% last year. The bold moves come as escalating trade tensions with the US threaten to derail the world’s second-largest economy.

• The government plans to issue 1.3T yuan ($178.9B) in ultra-long-term special treasury bonds, alongside 4.4T yuan in local government bonds — marking its largest fiscal stimulus since 2010.
• Consumer prices climbed just 0.2% in 2024, while producer prices have declined for over two years, prompting Beijing to lower its inflation target to 2% — the lowest in over two decades.

Forward-looking forecast: While Xi Jinping’s recent embrace of the private sector has boosted market confidence, with Chinese tech stocks now trading at 19x P/E, structural challenges remain. The economy faces headwinds from an aging workforce and mounting debt levels that could slow trend growth below 3% — well under Beijing’s ambitious target. As Trump’s tariffs bite and geopolitical tensions simmer, China’s stimulus gambit may prove crucial in determining whether the dragon can maintain its economic momentum.