China has announced plans to raise its fiscal deficit target to approximately 4% of its gross domestic product (GDP), marking the highest level since at least 2010. This new deficit plan, up from 3% last year, was confirmed in an official government report presented to parliament for review on Wednesday. The move comes amidst an ongoing trade war with the United States, led by President Donald Trump's administration, putting additional pressure on China's economic strategies.
The decision to increase the fiscal deficit was widely anticipated by experts. The previous record high was 3.6% in 2020. This increase is part of China's broader strategy to address significant economic challenges, including local government debt issues. In November, China unveiled a substantial support package amounting to 10 trillion yuan ($1.4 trillion) over five years, primarily aimed at tackling these debt problems.
Data accessed through Wind Information confirms that this fiscal deficit is the highest on record since 2010. The Chinese government is also expected to triple the quota for special sovereign bond sales to 3 trillion yuan ($410 billion) this year, significantly raising it from the previous year's quota of 1 trillion yuan. Additionally, the quota for special local government bond issuance is expected to increase to 4.5 trillion yuan, compared to the previous year's quota of 3.9 trillion yuan.
Chinese Minister of Finance Lan Fo'an emphasized that there is substantial room for increasing the deficit, reflecting the government's commitment to bolstering economic stability and growth. The increased deficit is seen as a necessary step to navigate the complex global economic landscape and ensure sustainable development.
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