China’s Outlook: Stimulus, Trade War, and Growth Prospects as US Recession Risks

Is Beijing Concerned About a Full-Blown US-China Trade War?

China’s economic pivot toward domestic consumption was outlined in the 14th Five-Year Plan (2021 – 2025). The upcoming 15th Five-Year Plan is expected to continue this focus while also expanding into AI.

Notably, economists expect US tariffs to have a limited impact on China’s global trade terms and economy. Beijing’s measured response to US tariffs suggested a willingness to go head-to-head with the US in a protracted trade battle. China’s foreign minister said that if the US insists on waging a trade or tariff war, China will see it through to the end.

Expert Views on Tariffs, Beijing’s Economic Targets and Policy Pledges

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero questioned the feasibility of China’s 2025 growth target:

“The target is very ambitious. It is ‘non-reachable’ without a bigger stimulus, especially in light of the increased tariffs.”

Meanwhile, former People’s Bank of China advisor Li Daokui dismissed tariff concerns, stating:

“I strongly believe this time around, tariff is no longer a big issue. If you give me the order of three top issues in China or challenges in China, I don’t even put top three the tariff from President Trump. […] The way to deal with tariffs is the same as dealing with other issues in Chinese economy. That is to boost domestic consumption. And on this issue, there’s already tremendous tremendous discussions, and also a lot of policies will be implemented down the road.”

Market Reaction: Hang Seng Index and Mainland Markets Advance

Despite trade tensions, investors appear optimistic about Beijing’s policy measures. The Hang Seng Index has risen 5% this week, while the Mainland’s CSI 300 and Shanghai Composite Index are up 1.40% and 1.46%, respectively.

In contrast, the Nasdaq Composite Index is down 1.56%, with the Dow and the S&P 500 falling 1.90% and 1.88%, respectively.

While Beijing sets an ambitious 2025 growth target, US recession fears are mounting, potentially limiting Trump’s options to target trade terms. 2025 US recession odds have surged to 41%, the highest since November, amid escalating trade tensions.