China targets record 2025 budget deficit to rev up economy

SINGAPORE (ICIS)–China has set its 2025 fiscal deficit target at a record yuan (CNY) 5.66 trillion ($780 billion), equivalent to around 4% of GDP, to fund the government’s stimulus measures and ensure the world’s second-biggest economy would post a 5% growth.

• Deficit-to-GDP target up from 3% in 2023
• GDP growth target maintained for third year
• US tariffs to hit exports and overall growth

Beijing plans to issue CNY1.3 trillion in special treasury bonds this year to help fund its stimulus measures, up from CNY1.0 trillion in 2024, China Premier Li Qiang said in a work report presented to the country’s legislature.

China kicked off on Wednesday the annual plenary sessions of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC) in Beijing, to hammer out the country’s economic policies and priorities.

The higher budget deficit for 2025 was in line with the government’s earlier announcement of a “more proactive” fiscal policies to boost economic growth.

Li also said that the country plans to create more than 12 million jobs in cities, setting the target for urban unemployment at around 5.5% for 2025, same as the previous year.

Calls for more fiscal stimulus have multiplied amid persisting headaches such as a prolonged property slump, sluggish consumption and soaring local government debts, analysts said.

TRADE WAR WITH US DAMPENS ECONOMIC ACTIVITY
Beijing needs to step up measures to counter Washington’s’ fresh tariffs as well as other economic and technological restrictions which are casting a long shadow on China’s slowing economy.

The US doubled tariffs on Chinese imports to 20% from 4 March, to which China hit back with 10% to 15% extra duties on US’ agricultural goods such as soybeans, corn and wheat, effective 10 March.

China is the biggest market for these agricultural products.

“If the tariffs linger, Chinese exports to the US could drop by a quarter to a third [by 25-33%],” said Harry Murphy Cruise, head of China economics at Moody’s Analytics.

Based on Washington-based think tank Peterson Institute for International Economics (PIIC), additional tariffs of 10% by the US on Chinese goods would shave China’s GDP by 0.14 percentage point in 2025, while the impact on US growth is less severe at 0.01 percentage point.

Analysts still deem Beijing’s target GDP growth of around 5% “ambitious” even though the target was set at the same rate for the past two years.

The goal “underscores our resolve to meet difficulties head-on and strive hard to deliver,” China Premier Li said, while acknowledging that “the external environment is becoming more complex and severe, which may have a greater impact on the country’s trade, science and technology and other fields”.

Beijing lowered its annual inflation target this year to around 2% from the longstanding goal of 3%, noting deflationary pressures facing the economy.

China’s producer price index (PPI) has remained in the red for 28 consecutive months from September 2022.

China is a major importer of petrochemicals whose self-sufficiency has been growing over the years due to strong capacity expansion.

Like most of Asia, the world’s second-biggest economy is dependent on exports as a pillar of growth.

($1 = CNY7.26)

Focus article by Fanny Zhang

Thumbnail image: Opening ceremony of the Third Session of 14th National People’s Congress of China in Beijing – 5 March 2025 (ANDRES MARTINEZ CASARES/EPA-EFE/Shutterstock)