(Bloomberg) — China said it has sufficient fiscal firepower to respond to external challenges, vowing to better execute pro-growth measures ahead of Donald Trump’s return to the White House later this month.
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The country has “ample fiscal policy room and tools to deal with new domestic and external problems,” Vice Finance Minister Liao Min said at a briefing on Friday. He repeated a pledge that the 2025 deficit-to-GDP ratio will rise, adding details will be announced after due legal process.
China’s top leaders have vowed greater fiscal support for the world’s second-largest economy this year. Government expenditure will help encourage consumption and fund infrastructure projects to drive domestic demand, as exports may face higher US tariffs from the incoming US administration.
“The direction of fiscal policy in 2025 is clear, very proactive,” Liao said. “We will provide strong support for economic and social development.”
The government has said it will sell more special sovereign and local bonds this year to fund various programs, including subsidies for buying smartphones and cars. Part of the funding will also be used to rein in local governments’ debt risks and recapitalize banks to beef up their lending ability.
Authorities have previously promised to raise the official deficit ratio to signal their emphasis on growth. Reuters last month reported officials planned to raise the level to 4% of gross domestic product. Beijing has typically kept deficit at 3% of GDP as it seeks to demonstrate fiscal discipline. The official number doesn’t count money borrowed through special bond sales.
The government typically announces its growth goal and annual budget, including the official deficit, at the yearly session of the National People’s Congress in March.
Liao pledged to accelerate the spending pace this year “as much as possible,” after slow implementation of the annual budget in recent years dragged on the economy.
The government this week expanded a program to subsidize companies and consumers to upgrade appliances and equipment, its flagship initiative to spur consumption. A first tranche of 81 billion yuan ($11 billion) has already been distributed among local governments to support goods trade-ins.
It has rolled out the biggest swap program in years to refinance “hidden” debt held by local governments and free up their ability to spend. The 10-trillion-yuan measure will move those liabilities onto public balance sheets over several years, stemming credit risks and reducing local governments’ debt servicing burden.
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Meanwhile, Beijing is allowing special local bond funds to be invested in more sectors and delegating the power to approve projects funded by the notes to 11 regions, as it seeks to better use the resource to drive the economy.
(Updates with more details)
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