As global economic uncertainties loom, China is taking decisive steps to bolster its economy through a more proactive fiscal policy. In a recent government work report delivered to the national legislature, Chinese Premier Li Qiang announced a significant shift towards increased fiscal spending aimed at sustaining economic momentum.
For 2025, China's government debt is projected to reach 11.86 trillion yuan (approximately $1.66 trillion), marking an increase of 2.9 trillion yuan from the previous year. Premier Li described this as a "notably higher level of spending," with the deficit-to-GDP target rising to 4 percent, up from 3 percent in 2024. This escalation surpasses even the deficit levels seen during the COVID-19 pandemic, highlighting China’s commitment to leveraging fiscal strength to navigate through economic challenges.
A cornerstone of this fiscal expansion is the issuance of a record 1.3 trillion yuan in ultra-long-term special treasury bonds, reflecting a 300 billion yuan increase from last year. Additionally, local government special bonds will see an issuance of 4.4 trillion yuan, another record high. These measures are designed to inject liquidity into the economy, lower financing costs, and accelerate economic activities amidst both global and domestic uncertainties.
Ultra-long-term special treasury bonds play a pivotal role in China's fiscal toolkit. Unlike previous issuances, which addressed immediate crises such as the 1997 Asian financial crisis or the 2020 pandemic downturn, the current bond issuance is forward-looking. With maturities spanning 20 to 50 years, these bonds fund strategic national projects focused on technological innovation, infrastructure resilience, green energy transitions, and ensuring food and energy security. This approach not only supports short-term economic stability but also positions China for sustained competitiveness in the global economy for decades to come.
By committing to higher spending and strategic investment, China aims to upgrade its industrial capacity, boost domestic consumption, and drive investment in key sectors. This proactive fiscal policy underscores China's dedication to maintaining robust economic growth and enhancing its role as a global economic leader.
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China's proactive fiscal policy driving growth, investment & stability
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