The increase in China's budget deficit reflects the government's commitment to reviving the economy amid significant challenges.
The potential for U.S. tariffs exceeding 60% on Chinese exports poses a substantial risk to the country's economic outlook, particularly for its export sector.
If the U.S. implements high tariffs on Chinese goods, it could lead to further economic strain and necessitate additional fiscal measures from the Chinese government.
China's focus on household income support and economic transformation may lead to long-term structural changes in its economy, potentially reducing reliance on exports.
China's leaders have set a record budget deficit target of 4% of GDP for next year, aiming to stimulate economic growth amidst challenging conditions. This decision follows a meeting of the Communist Party’s Politburo and the Central Economic Work Conference, where officials emphasized a more proactive fiscal policy. The increase in the deficit is expected to amount to an additional 1.3 trillion yuan ($179.4 billion), financed through special off-budget bonds to support various stimulus measures.
Despite the anticipated budget deficit, China plans to maintain its GDP growth target at around 5% for 2025. Officials acknowledge the need for enhanced efforts to boost economic recovery, especially in light of rising trade protectionism and a complicated external environment. The country is also focusing on economic transformation, supporting household income, and mitigating risks associated with high local government debt and a severe property crisis.
