China plans a record budget deficit of 4% of GDP in 2025, according to sources. This is up from the initial target of 3% for 2024 and marks a more proactive fiscal policy. The decision comes as the country prepares to counter the impact of expected US tariffs on Chinese imports.
The additional spending amounts to around $179.4 billion, which will be funded through issuing off-budget special bonds. This move is part of China’s efforts to maintain steady economic growth despite a severe property crisis and weak consumer demand.
China’s central bank has also announced plans to switch to an “appropriately loose” monetary policy stance, raising expectations of more interest rate cuts and liquidity injections. However, analysts say that the country will rely heavily on fiscal stimulus next year.
The move is part of China’s preparations for a potential increase in US tariffs, which could impact exports worth over $400 billion annually to the United States. The yuan is also being considered as a tool to mitigate the impact of punitive trade measures, according to sources.
China’s GDP growth target remains unchanged at around 5%, but analysts say that this high growth target aims to guide expectations and boost confidence rather than act as a binding constraint.
Source: https://www.reuters.com/markets/asia/china-plans-record-budget-deficit-4-gdp-2025-say-sources-2024-12-17