China is poised to implement more proactive fiscal policies in response to both domestic and international uncertainties, according to Finance Minister Lan Fo’an. His comments came during the annual parliamentary meeting known as the “Two Sessions,” amidst escalating trade tensions with the United States, which has recently increased tariffs on Chinese goods for the second time in a month.
China has retaliated with targeted duties and restrictions on U.S. companies. As part of its fiscal strategy, China announced an increase in its on-budget deficit to 4% of the national GDP, the highest level since 2010.
Furthermore, the government plans to issue 1.3 trillion yuan (approximately $178.9 billion) in long-term treasury bonds by 2025, a significant increase aimed primarily at supporting consumer trade-in programs. Additionally, China aims to issue 4.4 trillion yuan in local government special-purpose bonds this year, which will help alleviate the financial pressures faced by local authorities.
The government has identified stimulating consumption as its top priority in the upcoming year. Zheng Shanjie, head of the National Development and Reform Commission, indicated that a more detailed plan to boost consumption will be revealed soon.
Furthermore, China has set a GDP growth target of around 5% for this year, accompanied by the lowest inflation target in two decades at 2%. These adjustments reflect a pro-growth message communicated during the National People’s Congress.
Observers, including Aaron Costello from Cambridge Associates, noted that improving business and consumer sentiment remains critical for achieving the growth targets amidst ongoing trade challenges. Minister of Commerce Wang Wentao reiterated the importance of dialogue between China and the U.S. regarding trade issues, while officials emphasized the need for China to innovate independently in the face of foreign restrictions on technology.