Lujiazui Photo:VCG

China will implement a more proactive fiscal policy in 2025, including raising the fiscal deficit-to-GDP ratio and issuing larger scale government bonds and prioritizing fiscal support in key areas such as expanding domestic demand, according to a national fiscal work conference that concluded on Tuesday, in a fresh signal of China stepping up efforts to boost economic growth next year. 

The two-day conference reviewed China's fiscal work for 2024 and studied and arranged key tasks for 2025. Finance Minister Lan Fo'an delivered a work report at the conference, according to a statement issued by the Ministry of Finance on Tuesday. 

As part of the proactive fiscal policy for 2025, China will raise the fiscal deficit-to-GDP ratio and increase the intensity and speed of fiscal expenditure. China will also arrange the issuance of larger scale government bonds to offer greater support for stabilizing growth and adjusting structure. 

Efforts will be made to vigorously optimize expenditure structure and strengthen targeted allocation to improve livelihood, boost consumption and enhance sustained momentum. China will also strive to prevent and resolve risks in key areas, and promote stable fiscal operations and sustainable development. Fiscal payments transfers to local governments will also be further increased to help strengthen local fiscal resources.

Boosting growth

"In the face of a possible more challenging external environment in 2025, this more proactive fiscal policy will provide strong support for the entire economy operation and promote high-quality economic development and long-term growth," Lian Ping, director of the China Chief Economist Forum, told the Global Times on Tuesday. 

The national fiscal work conference further signals that China will pursue a more proactive fiscal policy environment, with various aspects of fiscal policy such as fiscal deficit and the scale of government bonds expected to be significantly higher than in the past, Lian said. 

For context, China set its deficit-to-GDP ratio at 3 percent for 2024 and the government deficit at 4.06 trillion yuan ($556 billion), an increase of 180 billion yuan from the 2023 budget figure. In 2024, 3.9 trillion yuan of special-purpose bonds for local governments would be issued, an increase of 100 billion yuan over 2023. In addition, 1 trillion yuan of ultra-long special treasury bonds was issued in 2024, according to this year's government work report released in March. 

The Central Economic Work Conference (CEWC), which was held from December 11 to 12 in which Chinese leaders decided priorities for the economic work in 2025, also said that China should set a higher deficit-to-GDP ratio and ensure that its fiscal policy is continuously forceful and more impactful. China will increase the issuance of ultra-long special treasury bonds and continue to support projects for implementing major national strategies and building security capacity in key areas, according to the CEWC.

Top of the key tasks for 2025 outlined at the CEWC is vigorously boosting consumption, improving investment efficiency and expanding domestic demand on all fronts.  

In line with the priorities set by the CEWC, the national fiscal work conference also prioritized supporting expanding domestic demand in 2025. Among the efforts, China will appropriately increase the basic pension for retirees and for urban and rural residents, and raise the fiscal subsidy standard for urban and rural residents' medical insurance to vigorously boost consumption.

Lian said that basic pension funds are the main source of income for many retirees, who account for an increasing proportion of the population. "Therefore, appropriately increasing the basic pension not only will improve livelihoods, but also effectively promote consumption, which in turn will have a positive effect on economic growth," the economist said, adding that expanding domestic demand is crucial amid the current economic situation. 

In November, China's total retail sales of consumer goods, a broad gauge of consumption, reached 4.38 trillion yuan, up 3 percent year-on-year, according to the latest official data released on December 16. 

In addition to increasing the basic pension, the national fiscal work conference said that China will further step up support for the trade-in of consumer goods and proactively expand effective investment, as part of efforts to expand domestic demand.

In 2024, China launched a multibillion-dollar consumer goods trade-in program, as the government moved swiftly to boost consumption amid external uncertainties and insufficient domestic demand.

Consumption remains a top priority for economic work in 2025, as it is directly related to the overall performance of the economy, according to Tian Yun, an economist based in Beijing.

Improving confidence

"At the CEWC, expanding domestic demand is listed as one of the top priorities, and it was stated that a moderately loose monetary policy will also be adopted. This is aimed at supporting growth in consumption," Tian told the Global Times on Tuesday. "Expanding consumption is the key to current economic policies, which will not only stabilize the domestic economy, but also improve confidence among international investors and drive the overall recovery of the economy."

Apart from consumption, the national fiscal work conference pledged to increase support for the building of a modern industrial system, including focusing on fully supporting research and breakthroughs in core technologies, expanding the reward and subsidy policy for specialized, sophisticated and innovative small- and medium-sized enterprises, and strengthening support to help enterprises tackle challenges. 

"The focus on support to build a modern industrial system and expanding investment to bolster scientific innovation capabilities, which are areas where huge fiscal spending is required, is also aimed at promoting long-term development and growth," Lian said, adding that fiscal policy in 2025 aims to strike a balance between current and long-term economic growth. 

Moreover, China's fiscal policy in 2025 will also support the integrated development of urban and rural areas, including vigorously promoting new urbanization, green development and high-level opening-up.

"There is still huge room for China to expand its industrial capacity… and there is vast development potential in areas such as urbanization and infrastructure," Tian said, adding that the meetings have sent a clear signal of strong fiscal policy support.