• China plans record fiscal spending in 2025 with deficit ratio hitting 4% of GDP
  • Move comes as US doubles tariffs on Chinese imports to 10%
  • Special treasury bond issuance increases to 1.3 trillion yuan to fund stimulus

Historic Fiscal Expansion

China will implement its most aggressive fiscal stimulus in history next year, with Premier Li Qiang announcing a 4% deficit-to-GDP ratio that shatters the traditional 3% ceiling. The unprecedented move will see total government spending reach 5.66 trillion yuan ($780 billion) - a 1.6 trillion yuan increase from 2024 levels.

"They will use stimulus to offset tariffs, so China can grow at 'around 5 per cent' in 2025," said Larry Hu, chief China economist at Macquarie Capital. The spending surge comes just days after the Trump administration imposed additional 10% tariffs on Chinese goods, effectively doubling recent levies.

Economic Countermeasures

The fiscal package includes a 30% increase in special treasury bond issuance to 1.3 trillion yuan, targeting strategic sectors vulnerable to trade pressures. While maintaining its 5% growth target, Beijing appears to be acknowledging private forecasts that predicted sub-5% expansion without intervention.

Government advisers, speaking on condition of anonymity, described the plan as a "dual-response" strategy addressing both external trade pressures and domestic demand weakness. The stimulus will focus on advanced manufacturing and technological self-sufficiency - areas particularly impacted by US trade restrictions.

Political Timing

The announcement during the National People's Congress plenary sessions signals China's intent to project economic stability amid growing global headwinds. Premier Li's work report framed the measures as necessary to "ensure the stability of the overall economic situation" while pursuing "high-quality development."

Market reaction was muted initially, with analysts noting the stimulus had been widely anticipated following the tariff announcements. However, bond yields ticked upward as traders priced in the increased government borrowing.