China is on track to achieve its primary economic and social development goals this year, with an expected growth rate of around 5 percent. This growth is set to contribute nearly 30 percent to the global economy. However, as the new year approaches, the country faces significant challenges, including intensifying geopolitical conflicts, rising global protectionism, and adverse shifts in the external environment.
Despite these hurdles, China's economy remains robust, characterized by numerous advantages, strong resilience, and substantial potential for continued development. The fundamental conditions and long-term trend of steady improvement remain intact. To maintain this momentum, adopting a more proactive fiscal policy and a moderately accommodative monetary policy will be crucial in 2025. Enhanced coordination between fiscal and financial policies is expected to boost policy synergy, transforming positive factors across various sectors into tangible development outcomes.
Firstly, expanding the scale of fiscal expenditure and increasing the fiscal deficit rate are recommended. Currently, China's government debt risks are manageable, particularly with the central government’s significant capacity to issue government bonds. Raising the deficit rate to between 3.5 percent and 4 percent in 2025 could unlock over 5 trillion yuan ($686.6 billion) in fiscal spending capacity. This boost is anticipated to enhance aggregate demand and drive economic growth.
Secondly, expanding the issuance of ultra-long-term special national and local bonds will strengthen fiscal counter-cyclical measures. These funds should support the \"two new\" policies, focusing on large-scale equipment renewal and consumer goods trade-ins to stimulate consumption in 2025. Efforts will include broadening subsidy coverage, optimizing structures, increasing rates, and targeting productive consumption such as equipment upgrades and essential living purchases. These measures aim to stabilize consumption, expand domestic demand, and create jobs. Additionally, scaling up investments in major national strategies and key security projects will ensure economic security and support key initiatives.
Thirdly, optimizing the structure of fiscal expenditure to enhance efficiency is essential. Shifting focus from investment 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, can address economic uncertainties faced by residents. This strategy is expected to reduce precautionary savings, boost consumption tendencies, and strengthen fiscal policies as a key driver of consumption.
Reference(s):
Active fiscal and loose monetary policies to foster China's economy
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