China, the world’s second-largest economy, plans to raise fiscal deficit to boost spending in 2025 to support its struggling economy, reported AFP, citing state media.
The Chinese economy has been battling with stagnant domestic consumption, a crisis hit property sector and rising government debt.
In 2024, China took several measures to boost economic growth, such as cutting interest rates, cancelling restrictions on buying houses and easing the debt burden on local governments.
According to economists, more direct fiscal stimulus is required to boost domestic consumption and promote growth of the Chinese economy, the report said.
On Tuesday, the Finance Minister, Lan Fo’an ,said China would “increase the fiscal deficit ratio to boost spending intensity”, it added citing state broadcaster CCTV.
China aims to focus more on improving livelihoods and boosting low consumption and the transfer payments to local governments in debt, the Finance Minister said.
The government has refrained from increasing spending over the fear of rising debt.
Despite such fears, the government this month has planned to opt for a “moderately loose monetary policy and a “more proactive” fiscal policy in 2025. This is a shift from its cautious approach earlier.
The national growth target for this year was five per cent, which Chinese President Xi Jinping is confident in achieving. However, several economists believe that China will miss this target, the report added.
According to the International Monetary Fund, the Chinese economy will go by 4.8 per cent this year and 4.5 per cent in next year.
The scale of new spending may be “lower than it looks on the surface,” the report said quoting Gary Ng, Senior Economist for Asia Pacific at Natixis.
“The current policy is also more about managing growth at a reasonably comfortable range for top policymakers rather than boosting growth,” Gary Ng added.