China’s National People’s Congress (NPC) announced several measures and targets for 2025. The GDP growth target is set at “around 5%” with the urban unemployment rate aimed at 5.5%.
The consumer price index (CPI) target is around 2%, down from the current 3%. The budget deficit is projected at 4% of GDP, with a national budget deficit of 5.66 trillion yuan. Local government special bonds are set at 4.4 trillion yuan, an increase from 3.9 trillion in 2024.
Market Reactions In China
Chinese equities showed mixed results; Hong Kong markets were up, while mainland markets declined. Meanwhile, Reserve Bank of Australia Deputy Governor Hauser addressed trade war uncertainties, noting a gradual approach to rate cuts.
In the United States, President Trump’s State of the Union outlined plans for tax-deductible car loan interest, confirmed new tariffs, and called for the repeal of the Chips Act.
Bank of Japan Deputy Governor Uchida maintained a hawkish outlook, stating interest rates will rise if economic forecasts are met. FX movements were mild, with the USD losing ground initially before regaining some value later in the session.
The targets and projections from China’s National People’s Congress set a clear path for economic policy in the coming year. A GDP growth aim of “around 5%” suggests policymakers expect stable expansion despite external pressures. The adjustment to inflation expectations, with the consumer price index now targeting 2%, signals growing confidence in their ability to contain price increases. The budget deficit, pegged at 4% of GDP, indicates continued fiscal support, though the impact of higher local government special bond issuance—now 4.4 trillion yuan—raises questions about debt sustainability.
Market response within China reflected this mixed outlook. While Hong Kong-listed shares performed well, mainland stocks showed weakness, likely reflecting domestic concerns or investor caution. International factors also played a role, particularly given external monetary policy signals.
In Australia, Hauser’s statements point to a patient approach in adjusting interest rates. While the Reserve Bank of Australia acknowledges global trade uncertainties, recent comments suggest no rush to shift policies. This measured stance may keep pressure on the Australian dollar, particularly if other central banks adjust their own policies more aggressively.
Us Fiscal And Trade Policy
The State of the Union address in the United States brought further clarity on trade policy and fiscal direction. Tax incentives related to car loan interest may support domestic consumption, while fresh tariffs indicate a continued focus on protecting domestic industry. The push to dismantle the Chips Act aligns with broader deregulation efforts, with potential implications for semiconductor supply chains.
Meanwhile, Japan’s central bank remains firmly positioned for potential rate hikes. Uchida has left little doubt that if current economic projections hold, monetary tightening will follow. The yen saw only limited movement, as FX markets digested these remarks alongside US dollar fluctuations. Early losses for the greenback gave way to partial recovery, highlighting the ongoing sensitivity to policy clarity across major economies.
Taken together, the policy objectives and central bank signals from multiple regions demand careful assessment. While some areas indicate steadier conditions, others introduce fresh volatility.
