Major targets, budget numbers in line with forecasts

On March 5, Premier Li Qiang delivered the 2025 government work report at the National People's Congress (NPC). According to the report, all major policy targets and budget numbers are in line with our predictions. We agree with Li's comment that "achieving this year's targets won't be easy", and we maintain our GDP growth forecast for this year at 4.5 percent. We expect China might once again ramp up policy support in the second half year.

Similar to the past couple of years, we expect China's economy to start the year strongly (which it has), only to face much stronger downside pressure later this year. Recently, the surprising breakthrough of DeepSeek triggered a stock market rally, which may boost investment and consumption. The expansion of the trade-in program is stimulating sales of digital goods, and expectations of massive tariff hikes by the Trump administration have led to front-loading, while the latest round of property easing measures has released some pent-up demand for homes in large cities.

The report doubled down on its commitment to sustain forceful efforts to stem the decline in the property sector, rolling out city-tailored easing measures and ramping up urban village renovations while tightening the reins on new land supply and tackling housing inventory. Local governments can tap this year's 4.4 trillion yuan in the local government special bond pool to fund land and inventory purchases. In addition, local authorities will have more discretion over inventory buyouts – deciding buyers, prices, and usage – while the scope of the PBoC's affordable housing re-lending facilities will be expanded. The report also vowed to provide financing support for developers to mitigate debt defaults and ensure the delivery of pre-sold homes.

Lu Ting, chief China economist of Nomura.

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