As China navigates increasingly complex economic challenges, its focus on growth and reforms remains a central priority. A key event in recent weeks was China’s annual “Two Sessions”, referring to the meetings of the country’s top legislature – the National People’s Congress (NPC) – and the top political advisory body – the Chinese People’s Political Consultative Conference (CPPCC).
The Government Work Report unveiled at the start of the NPC gathering outlined China’s annual growth target, policy priorities, development goals, and fiscal strategies. This year’s Two Sessions is particularly important, as they come amidst heightened US-China trade tensions, weak consumer demand, and growing concerns over deflation. Despite these pressures, China reaffirmed its ambitious 5% GDP growth target for 2025 and announced several stimulus measures, some of which are highlighted below:
- China raised its fiscal deficit target to around 4% of GDP (5.66 trillion yuan or $780 billion), the highest level since 1994. Previously, China has aimed to keep the official deficit at no more than 3% of GDP to maintain fiscal discipline.
- China plans to issue 500 billion yuan ($69 billion) in special sovereign bonds to support major state-owned banks, enhancing their ability to finance the economic recovery.
- Policymakers will allocate 300 billion yuan ($41.5 billion) in special ultra-long-term bonds for a consumer trade-in program, an expansion from last year’s 150 billion yuan.
- The government is adopting a “moderately loose” monetary policy stance, signalling potential interest rate cuts and adjustments to the reserve requirement ratio (RRR) for banks to stimulate domestic growth
While the upbeat economic and fiscal announcements offer hope for China’s struggling economy, industry-specific policies do not reflect the same level of optimism. This could have significant implications for the dry bulk freight market.
In light of overproduction and environmental concerns, the Chinese government has signalled plans to cut steel output in 2025. While no official target has been set, there has been speculation that production cuts could range from 15-50 million tons. Given that China is the world’s largest importer of iron ore and coal, these production cuts may impact its import demand for these critical commodities.
Additionally, coal remains essential to China’s energy mix, with the government reiterating its commitment to coal as a baseline power source. Despite ongoing efforts to expand renewable energy capacity, China is set to continue enhancing domestic coal production. This increased focus on domestic coal production could dampen China’s coal import demand. In recent times, China has seen overwhelming domestic coal supplies, prompting China Shenhua Energy – the country’s largest coal miner and importer – to halt spot purchases of imported coal as port stockpiles grow.
In the agriculture sector, China has raised its annual grain production target to 700 million tons for 2025, up from its target of 650 million tons last year, and has increased its grain stockpiling budget. This reflects the government’s continued focus on bolstering food security amid rising geopolitical uncertainties and climate challenges.
Beyond China’s borders, the global environment is becoming increasingly hostile, with escalating trade wars and growing barriers. As of March 12, 2025, the U.S. had imposed a 20% tariff on Chinese goods, in addition to the 25% tariff on all steel and aluminium entering the States. China has signalled a strong response to U.S.-imposed tariffs, despite having already imposed a 15% tariff on U.S. coal, and tariffs of up to 15% on a range of U.S. agricultural goods.
As China grapples with an array of domestic and international challenges, its focus on economic reform and growth remains steadfast. The fiscal and economic measures announced during the Two Sessions indicate a government determined to stabilize its economy despite pressures from weak consumer demand and global tensions. However, the industry-specific shifts – particularly in steel production, coal, and agriculture – are likely to create challenges for the dry bulk shipping market. Staying abreast of these developments will be critical for industry participants, in order to adjust strategies and navigate the evolving landscape.