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China heads for budget deficit of 4% of GDP
Chinese authorities are worried about the state of the national economy! The leadership is doing everything to keep it afloat. During the December meeting of the Politburo and the Central Economic Work Conference (CEWC), a decision was made to increase the country’s budget deficit to 4% of GDP. As a result, in 2025, this figure will hit the highest level ever recorded.
This CEWC decision aligns with plans to boost fiscal policy, which is necessary to support economic growth. At the same time, analysts expect China’s monetary policy to remain moderately loose.
The new budget deficit target is a significant jump from the previously forecasted 3% of GDP. Additional spending, equivalent to 1.3 trillion yuan ($179.4 billion), will be partially funded through the issuance of special off-budget bonds.
China is sticking to its economic growth target of 5%, which matches the 2024 level despite ongoing economic troubles. These include a property market crisis and weak domestic demand.
During the closed CEWC session, officials emphasized the need for stable economic growth, supported by fiscal and monetary measures. These are expected to help stabilize China’s economy.
Currently, the Chinese economy is facing looming external risks. Of particular concern are potential 60% tariffs on Chinese goods, promised by President-elect Donald Trump. Analysts warn that such measures could cut exporter profits, worsen the issue of excess capacity, and slow economic expansion.
For now, Beijing is relying on fiscal stimulus to counter external pressures. Meanwhile, Chinese authorities are exploring other financial tools, including adjustments to the exchange rate, according to the CEWC report.
Published 28 December 2024
© InstaFintech Group
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© InstaFintech Group
