China to increase fiscal deficit, boost spending to strengthen economy
In a bid to support its ailing economy, China has announced plans to raise its fiscal deficit and boost spending next year. The country's Finance Minister Lan Fo'an announced the strategy at a conference in Beijing on Tuesday. According to state broadcaster CCTV, Lan said China would "increase the fiscal deficit ratio to boost spending intensity."
China's new strategy focuses on improving livelihoods
Along with widening the fiscal deficit, Beijing also plans to focus more on improving living standards and reviving sluggish consumption. Lan also announced that transfer payments to debt-ridden local governments would be increased. This move is a major departure from China's previous reluctance to increase government spending over fears of piling debt.
China plans record $411 billion special treasury bond issuance
According to Reuters, China plans to issue a record 3 trillion yuan ($411 billion) in special treasury bonds in 2025, up sharply from this year's 1 trillion yuan. The move is part of Beijing's efforts to stimulate a faltering economy and counter the expected rise in US tariffs under Donald Trump's administration starting January. Proceeds will support subsidy programs to boost consumption, fund equipment upgrades for businesses, and invest in advanced, innovation-driven sectors, among other initiatives aimed at economic revival.
China adopts 'moderately loose' monetary policy for 2025
Earlier this month, Beijing's leadership promised to embrace a "moderately loose" monetary policy and a "more proactive" fiscal policy next year. The change in wording marks a departure from the government's earlier promise of a more cautious approach. The new strategy hopes to meet an official national growth target of about 5% this year, a target President Xi Jinping has expressed confidence in achieving.
Economists express doubts over China's growth target
Despite President Xi Jinping's confidence, many economists remain doubtful that China will meet its growth target. The International Monetary Fund (IMF) predicts China's economy will grow by 4.8% this year and 4.5% next year, below the government's target. Gary Ng, Senior Economist for Asia Pacific at Natixis, told AFP that the scale of new spending may be "lower than it looks on the surface."
