China's Finance Minister, Lan Fo'an, announced that the country possesses significant leeway to maneuver its fiscal policy amidst prevailing domestic and international uncertainties. This declaration comes as the nation grapples with a raised on-budget deficit now pegged at 4% of its gross domestic product (GDP)—the highest since at least 2010. The statement was made during the annual "Two Sessions" meeting, coinciding with heightened tensions as U.S. President Donald Trump increased tariffs on Chinese goods for the second time in a month.
The Chinese government has set ambitious economic targets for 2023, aiming for a GDP growth of around 5% and an inflation rate of 2%, marking the lowest inflation target in approximately two decades. Last year, China's economy achieved a growth rate of 5%, buoyed by robust export activities that counterbalanced weak domestic consumption and challenges within the real estate sector.
To address financial constraints at the local level, China plans to issue 1.3 trillion yuan in ultra-long-term special treasury bonds by 2025, representing a 300 billion yuan increase from the previous year. Additionally, the country aims to distribute 4.4 trillion yuan in local government special-purpose bonds this year, a significant rise of 500 billion yuan compared to last year. These bonds are designed to alleviate the financial pressures on local authorities, enabling them to undertake necessary infrastructure and development projects.
"China has more room to act on fiscal policy amid domestic and external uncertainties," – Finance Minister Lan Fo'an.
The announcement at the "Two Sessions" meeting underscores China's proactive stance in ensuring fiscal stability and economic growth. The meeting serves as an annual parliamentary gathering where pivotal national policies are discussed and established.
"China has delivered a pro-growth message here at the [National People's Congress], in line with expectations." – Aaron Costello, head of Asia at Cambridge Associates.
The government's strategic approach reflects its commitment to fostering economic resilience amidst global challenges. By enhancing its fiscal capabilities and setting clear economic objectives, China intends to sustain its growth trajectory while managing potential risks associated with fluctuating global markets and trade disputes.
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