The picture depicts a housing complex under construction in Hangzhou, China on December 16th, 2024.
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BEIJING – China announced on Wednesday plans to raise its fiscal deficit to “about 4%” of gross domestic product. This is a rare increase that indicates meaningful changes in policy.
The goal was confirmed in the official government report for review in Parliament on Wednesday.
The new deficit plan, which rose from 3% last year, comes amid the escalation of the trade war with US President Donald Trump’s administration.
A 4% increase in GDP was widely expected. Data accessed via Wind information marks the highest fiscal deficit on record, dating back to 2010. In 2020, the previous high was 3.6%, data show.
In October, China’s finance minister Lang Foun said the space for the increase in the deficit was “slightly large.”
In November, China announced a support package of 10 trillion yuan ($1.4 trillion) over five years. This is primarily to tackle local government debt issues.
The country’s slump in the real estate market has become a significant source of local government revenue. Many of them struggled financially even before they had to spend on Covid-19 measures. Meanwhile, the overall lack of consumption and slow growth has led to a demand for more fiscal stimulus.
China is also expected to triple its special sovereign bond sales quota this year from 1 trillion yuan in 2024 to 3 trillion yuan ($400 billion), and was expected to increase the annual quota for local government bond issuances of 4.5 trillion yuan from the previous 3.9 trillion yuan.
