As the year draws to a close, China is poised to meet its primary economic and social development goals, with an anticipated growth rate of approximately 5 percent. This robust performance is expected to contribute nearly 30 percent to global economic growth, underscoring China’s significant role on the world stage. However, the road ahead is not without challenges. The nation’s economy faces headwinds from intensifying geopolitical conflicts, rising global protectionism, and the lingering effects of an evolving external environment.
Despite these obstacles, China’s economy remains resilient. The nation’s solid foundation, numerous advantages, and substantial potential for continued development signal a steadfast trajectory toward long-term improvement. Looking ahead to 2025, China plans to adopt more proactive fiscal policies and a moderately accommodative monetary policy to navigate these challenges and stimulate growth.
Expanding Fiscal Expenditure and Increasing Deficit Rate
One proposed strategy is to expand the scale of fiscal expenditure and increase the fiscal deficit rate. Currently, China’s government debt risks are generally manageable, with the central government possessing significant capacity to issue government bonds. By raising both the scale and growth rate of fiscal spending in 2025, and increasing the fiscal deficit rate from the 3 percent level in 2024 to a range of 3.5 to 4 percent, China could unlock over 5 trillion yuan (approximately $686.6 billion) in fiscal spending capacity. This infusion of funds would provide a robust boost to aggregate demand and drive economic growth.
Issuing Ultra-Long-Term Bonds to Strengthen Counter-Cyclical Measures
Expanding the issuance of ultra-long-term special national and local bonds is another key initiative. These funds are intended to support the “two new” policies: large-scale equipment renewal and consumer goods trade-ins, aiming to boost consumption in 2025. Efforts will focus on broadening subsidy coverage, optimizing structures, increasing rates, and targeting productive consumption such as equipment upgrades and essential living expenses. These measures are expected to stabilize consumption, expand domestic demand, and create jobs.
Additionally, investments in major national strategies and key security projects will be scaled up. By adopting a forward-looking approach to address future strategic needs, these policies aim to ensure economic security, support key initiatives, and drive development by linking investment to consumption growth.
Optimizing Fiscal Expenditure to Enhance Efficiency
Optimizing the structure of fiscal expenditure is also on the agenda. A shift from investment-focused to consumption-based fiscal policies is recommended. Increasing financial investments in healthcare, education, pensions, and other essential livelihood areas, as well as providing greater support to vulnerable groups, could address economic uncertainties among residents. This approach would reduce precautionary savings, boost residents’ consumption tendencies, and strengthen fiscal policies as a key driver of consumption.
By adopting these strategies, China aims to transform positive factors across various sectors into tangible development outcomes. Enhanced coordination between fiscal and financial policies will be crucial in achieving policy synergy and fostering sustainable economic growth in the coming years.
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Active fiscal and loose monetary policies to foster China's economy
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