As trade tensions between the United States and China intensify, China has commenced its pivotal political and legislative meetings, commonly known as the "Two Sessions." This annual event brings together thousands of delegates in Beijing for the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC). While the delegates primarily endorse decisions predetermined by the Chinese Communist Party (CCP), these meetings offer crucial insights into China's policy direction, especially with the backdrop of President Trump's trade policies.

Premier Li Qiang, during the opening session, announced a 5% growth target for 2025, acknowledging the challenges posed by the external environment and domestic economic weaknesses. He highlighted disruptions to the multilateral trading system and increasing tariff barriers, describing the escalating US-China competition as changes "unseen in a century."

In response to the US tariffs, China has implemented retaliatory measures, with additional tariffs on certain US imports set to take effect. China's Foreign Ministry has declared its readiness to fight any form of trade war. However, Chenggang Xu from the Stanford Center on China's Economy and Institutions suggests that the actual impact of China's response may be smaller than expected, noting that Trump's tariffs are lower than initially promised and also affect US allies.

Antonia Hmaidi from the Mercator Institute for China Studies (MERICS) believes that US tariffs are unlikely to alter Beijing's long-term economic vision. While tariffs could impact GDP growth, Beijing is more focused on long-term goals and views tariffs as short-term issues.

Analysts suggest that US restrictions on Chinese access to cutting-edge technology, particularly semiconductors, will have a more significant impact than tariffs. China is focusing on becoming self-reliant in high-tech manufacturing, including AI, green tech, and biotech. This aligns with long-term plans like "Made in China 2025," aimed at establishing China as a global leader in high-tech manufacturing.

Premier Li emphasized the importance of the digital economy and the application of AI models, including intelligent connected vehicles and AI-enabled devices. The success of Chinese AI company DeepSeek is seen as evidence that China is on the right track. Hmaidi anticipates further tightening of US export controls to prevent China from becoming a competitor in AI.

China faces economic challenges, including weak domestic demand and a struggling real estate market. The Two Sessions have emphasized boosting consumption to accelerate growth. China is preparing for external challenges by moderately loosening its fiscal policy, with a deficit-to-GDP ratio set at around 4%. Xu argues that stimulating demand is not enough and that structural changes are needed to increase household income's share of the economy.