China moves to Trump-proof its economy

An annual gathering of top officials on the economy concluded with pledges to cut interest rates and boost government borrowing to pep up economic growth, according to a report by China’s state broadcaster Thursday.

Officials also vowed to stabilize stock and real-estate markets and see off risks from “external shocks," the report said, a veiled reference to the likelihood of renewed confrontation with Washington over trade, technology and other hot-button issues under a second Trump presidency.

China’s economy is in trouble even without the prospect of worsening trade friction with the U.S. Local governments are swimming in debt and a yearslong property crisis is rumbling on. Subdued consumer spending and ballooning industrial production mean the economy is struggling to banish the specter of deflation.

A renewed clash with Trump over trade threatens to deprive China of the export engine that has been propping up growth for the past year, heaping pressure on Beijing to reinvigorate the domestic economy—or watch growth slow below the 5% or so annual rate it is expected to notch this year.

The U.S. president-elect last month threatened China with tariffs of 10% on all imports on top of existing levies, citing what he says is Beijing’s failure to police chemicals that go into making fentanyl. During his presidential run, he talked about raising tariffs on Chinese imports as high as 60%, which economists said would significantly pinch growth in China were he to follow through.

China has signaled that it, too, is gearing up for a bruising trade fight. In recent days, Beijing has launched a regulatory probe into U.S. semiconductor champion Nvidia , threatened to blacklist a prominent American apparel maker, blocked the export of critical minerals to the U.S. and squeezed the supply chain for drones, a run of forceful measures that showcase its armory of tools to hit back at the U.S. if Trump follows through on his tariff threat.

Thursday’s announcements, delivered following the conclusion of a meeting of China’s Central Economic Work Conference, an annual get-together of top officials focused on economic planning, were hinted at earlier in the week by the Politburo, China’s top decision-making body.

The 24-man panel concluded its Monday confab with officials casting aside guidance to maintain a “prudent" stance on monetary policy in favor of one they described as “moderately loose," language they hadn’t used since the 2008-09 financial crisis. Economists said to expect interest-rate cuts, ample central-bank funds for banks and reductions in bank-reserve requirements as a result.

The Politburo also promised a more proactive fiscal policy, signaling its intention to let China’s budget deficit widen next year beyond its current level of 3% of gross domestic product.

Officials have been gently dialing up stimulus measures since September, when, after months of hesitancy and worsening economic signals, they uncorked a package of measures to lower borrowing costs, juice the stock market and abandon most restrictions on home buying. They also outlined a $1.4 trillion package to ease the debt burden of local governments , where widespread financial distress is compounding China’s growth woes.

Still, key details about the stimulus and the government’s broader economic plans remain unknown and are likely to remain so until a meeting of China’s National People’s Congress in March, the nation’s top legislative body.

Among them: What growth target will the government set for 2025? How big a budget deficit will Beijing allow? And what concrete steps will it take to stabilize the property market and boost consumption?

The even bigger question is whether the coming policy push will be enough to revive flagging growth and insulate the economy amid prospects of an intensifying trade blowback.

In a research note Wednesday, Morgan Stanley economists said tumbling bond yields in China suggest investors aren’t convinced policy makers can successfully boost growth and inflation. They said Beijing’s best bet to drive a sustainable economic revival is to cut back on investment and take steps to strengthen China’s threadbare social safety net to propel a durable pickup in consumption, a policy mix Beijing has for years been reluctant to embrace.

Duncan Wrigley, chief China economist at Pantheon Macroeconomics in London, said he expects officials will persist with a restrained approach to stimulus to ensure they have firepower in reserve while the next phase of the trade war plays out. But that does imply slower growth, he said in a report Thursday, anticipating growth will slow to 4.4% in 2025, and just 4% the following year.

Write to Jason Douglas at jason.douglas@wsj.com