China has announced a sweeping plan to stimulate domestic spending as it grapples with the economic strain of U.S. tariffs and sluggish consumer confidence. The initiative, introduced by state media on Sunday, seeks to strengthen household incomes, expand childcare subsidies, and enhance trade-in programs for outdated goods like cars and electronics.

Premier Li Qiang recently underscored the importance of steady economic growth, setting an ambitious target of around 5% for the year. Achieving this goal largely depends on increasing domestic consumption to reduce reliance on exports, especially as global trade tensions escalate.

Speaking at a press conference on Monday, Li Chunlin, deputy director of the National Development and Reform Commission, admitted that boosting consumer confidence remains a challenge. He emphasized the need for stronger measures to expand demand and meet the growing aspirations of Chinese citizens.

China’s economy faces multiple hurdles, including a prolonged real estate downturn and an uncertain job market. Deflation concerns have further discouraged spending, as consumers anticipate lower prices in the future. Official data released on Monday showed that China’s Consumer Price Index dropped by 0.7% in February, marking its lowest level in over a year.

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Retail sales saw a 4% rise in the first two months of 2025, improving slightly from December’s 3.7% increase. Despite this uptick, consumer sentiment remains fragile. Meanwhile, industrial production grew by 5.9%, exceeding economist predictions and offering some hope for broader economic stability.

Trade tensions with the United States continue to add pressure. Washington recently doubled tariffs on all Chinese imports to 20%, prompting Beijing to impose retaliatory tariffs on U.S. agricultural products. The impact of these measures is expected to further challenge China’s economic recovery.

Economists suggest that while government stimulus could drive short-term growth, persistent structural issues may hinder long-term progress. The effectiveness of China’s new policies will depend on how quickly they translate into tangible consumer spending and business investment.

With global economic conditions remaining uncertain, China’s leadership faces mounting pressure to maintain stability. The success of this latest plan could determine whether the country sustains its growth momentum or faces deeper economic struggles in the months ahead.

Reported by CNN.