SCIO briefing on China's economic performance in Q1 2025

Bloomberg:

Currently, the United States has imposed a 145% tariff on China. If the temporary easing measures for certain technological products expire and the tariff rate stays at 145%, what percentage impact does China expect this would have on its GDP? What is your outlook for China's economic growth in the coming quarters? Can China achieve its growth target of around 5% this year? Thank you.

Sheng Laiyun:

Thank you for your questions. We strongly oppose the U.S.'s use of tariff barriers and trade bullying. Such actions are harmful to others without benefiting the U.S. itself, violate economic principles and the rules of global trade, and seriously disrupt the world economic order, hindering the global economic recovery. China is committed to taking a series of countermeasures, which are not only necessary to safeguard its own development interests, but also legitimate actions to uphold the multilateral trading system and the rules of the World Trade Organization.

In the short term, the U.S.'s imposition of high tariffs will place some pressure on China's economy and foreign trade, but it won't change the long-term trend of steady improvement in China's economy. The Chinese economy is built on a solid foundation, with numerous advantages, strong resilience and great potential. We have the confidence, strength and ability to overcome external challenges and realize the goals we have set. This confidence is grounded in several key factors.

First, the economy has a solid foundation and robust support from domestic demand. After more than 40 years of reform and opening up, China has become the world's second-largest economy and has remained the largest manufacturing nation for 15 consecutive years. With a complete industrial system and strong supporting capabilities, China's economic foundation is solid and stable. At the same time, China's population of over 1.4 billion creates a vast market. With per capita GDP now exceeding $13,000, the country is at a pivotal stage of consumption upgrading. The market holds strong growth potential, and there is considerable room for both investment and consumption to expand, supporting the sustained development of China's economy.

Second, China's market is highly diversified, and its exports remain resilient. Supported by a robust industrial system, Chinese products are highly competitive internationally and enjoy an excellent reputation globally. In recent years, China has actively explored international markets and developed a diversified trade structure, achieving remarkable results. China is now a trading partner to more than 150 countries and regions worldwide. China is also actively promoting trade with countries participating in the Belt and Road Initiative. In the first quarter of this year, exports to Belt and Road partner countries grew 7.2% year on year, and goods imports and exports with these countries accounted for more than half of China's total goods trade. A diversified market structure is taking shape, meaning China is becoming less dependent on any single export market. For example, in 2018, exports to the U.S. accounted for 19.2% of China's total exports. By last year, that figure had fallen to 14.7%. Therefore, China's foreign trade is quite resilient. The recently released first-quarter foreign trade data also shows that, despite the growing external restrictions, exports still increased 6.9%.

Third, the transformation has been effective, and new growth drivers have strengthened. Since the 18th CPC National Congress, China's economy has achieved continued progress in restructuring, upgrading and high-quality development. The previous development model that relied on investment and exports has fundamentally changed, and a new pattern of economic growth driven by domestic demand and innovation is taking shape. In the past five years, domestic demand has contributed more than 80% of economic growth on average among the three major drivers. Last year, the value-added of new business sectors, forms and models accounted for about 18% of GDP. We are now in the era of the digital economy. Last year, the value-added of the core industries of China's digital economy accounted for about 10% of GDP. New growth drivers are constantly emerging, helping improve coordination and stability within China's economy.

Fourth, we have gained experience in responding to challenges and have introduced policies to provide support. Since reform and opening up, China's economy has faced major challenges, including the Asian and global financial crises, China-U.S. trade frictions and the severe impact of the COVID-19 pandemic in recent years. However, China has overcome these challenges and gained extensive experience in macroeconomic regulation. In response to current external changes, the Central Economic Work Conference has made comprehensive forecasts. We have adopted more proactive macro policies, timely implemented a more proactive fiscal policy and a moderately easy monetary policy. In the first quarter, the continued impact of policies played an important role in ensuring a strong start for the national economy. We will introduce incremental policies in a timely manner in response to changes in the external situation. Ample policy tools provide a safeguard for addressing external influences and challenges.

Fifth, our system has distinct advantages, and the public remains confident. Under the leadership of General Secretary Xi Jinping and the CPC Central Committee, and with the institutional strength to pool resources for solving major problems, we can efficiently mobilize various resources to effectively respond to major external challenges. In addition, our entrepreneurs are bold and hardworking, and the Chinese people are intelligent and diligent. These qualities form the foundation of our confidence in facing risks and challenges.

Therefore, based on these assessments, we are fully confident in the future trajectory and development prospects of China's economy. Thank you.