| March 5 marks the year’s most important policy barometer for China’s economy. The upcoming third session of the National People’s Congress (NPC) arrives at a unique juncture, where domestic and international challenges converge. Externally, China faces a “stress test” as U.S. tariffs on Chinese goods soar beyond 40%, while internally, the economy grapples with a deeply consolidating real estate market, insufficient momentum for consumption recovery, and cautious private investment.
This session is not only an opportunity for China to counter external shocks but also a crucial moment to drive internal restructuring and promote high-quality economic development.
Recently, the White House announced an additional 10% tariff on Chinese imports, which, effective March 4, could push the overall tariff rate to around 40%—far exceeding market expectations. The U.S.’s aggressive stance has undoubtedly escalated trade friction between the two nations and disrupted the stability of export enterprises and global supply chains.
At the same time, domestically, a long-sluggish real estate market has failed to unlock sufficient consumption potential. Coupled with tepid private investment sentiment and persistently low inflation, these factors expose an underlying weakness in domestic demand that restrains overall economic vitality. Against this backdrop, achieving stable growth and driving structural transformation have emerged as two key challenges for the government.=
Meeting Focus: Tariff Countermeasures, Fiscal Stimulus, and Tech Support
In response to escalating trade frictions, Chinese authorities are actively discussing countermeasures to offset the risks brought on by the increased U.S. tariffs. Measures to stabilize the Renminbi exchange rate and enhance cooperation with other trading partners are also expected to be incorporated into a comprehensive response framework, aiming to mitigate the adverse impacts of heightened global trade tensions on the domestic economy.
During the NPC session—which is crucial for setting the direction of China’s macroeconomic policy—market participants are especially keen to hear about enhanced fiscal stimulus and support for technology enterprises, rather than just direct counter-tariff measures. While maintaining a GDP growth target of around 5%, the government may also, for the first time, adjust its inflation target downward to about 2% to address weak domestic demand and deflation risks.
On this foundation, the government is expected to secure funding for infrastructure development, manufacturing upgrades, and consumer support by expanding the fiscal deficit, increasing the issuance of special long-term bonds and local government special bonds, and continuing efforts in debt swapping and bank capital injections.
Another key agenda item is the support for technological innovation and high-tech industries. Since January, companies like DeepSeek and Alibaba have continuously advanced technological innovation and ramped up capital investment, revealing the enormous potential within the tech and AI sectors. To break the current “dual-speed” growth model—where export and manufacturing momentum is hampered by a sluggish real estate market and weak domestic demand—policymakers are likely to introduce more targeted support measures.
These could include optimizing R&D investments, improving financial support conditions, and providing tailored policy assistance to leading tech enterprises. Such measures would not only enhance the autonomy and resilience of the industrial supply chain by reducing reliance on critical foreign technologies but also help ignite new momentum for economic transformation and upgrading. Moreover, they reinforce the positive signals previously conveyed in meetings with private entrepreneurs, further boosting overall private sector performance.
Authorities are also expected to continue focusing on real estate market regulation. By promoting initiatives such as urban village upgrades, shantytown renovations, and repurchasing unsold housing stocks, they aim to keep property prices and market confidence stable, thereby stimulating domestic demand.
Market Expectations and Risk Events
Once the policy announcements are made, market interpretations of the NPC session will directly influence investor sentiment and market trends. Chinese assets—particularly the Hang Seng Index—are likely to experience significant fluctuations as policy details emerge. If the authorities deliver clear counter-tariff measures along with strong signals of fiscal support, market confidence could receive a much-needed boost. Conversely, if the measures prove too cautious or their execution falls short, uncertainty may intensify, potentially leading to capital outflows and a decline in asset prices.
Moreover, several risk catalysts remain in play after the session. On the U.S. side, adjustments to the low-value exemption policy for Chinese goods, the imminent release of the “America First Trade Policy” survey results in early April, and moves toward reciprocal tariffs could trigger another round of tariff hikes, posing a threat to China’s economic recovery. Additionally, the unresolved issue surrounding the delayed enforcement of the TikTok ban, if it worsens, may further strain Sino-U.S. trade relations.
Domestically, closely watched indicators such as CPI, export and industrial production data, the Q1 GDP report due in April, and the Political Bureau meeting later in the month will provide further insight into the economic outlook. These factors necessitate that policymakers remain highly vigilant in the coming months. Should economic growth slow further, deflationary pressures intensify, or trade tensions escalate, another round of stimulus measures may become inevitable.
Despite a complex and volatile environment both at home and abroad, the upcoming NPC session represents a critical opportunity for policy recalibration. By setting clear macroeconomic targets, bolstering fiscal support, and advancing technological innovation, the government is laying the foundation for sustainable economic development while mitigating short-term shocks and facilitating long-term structural adjustments.
For traders and investors, short-term volatility appears inevitable. The overall impact on market confidence and the economic trajectory will ultimately hinge on how effectively these policies are implemented and how subsequent risk events unfold. Staying attuned to policy developments and external risk factors will be crucial in navigating the uncertain path ahead.
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