China is gearing up to boost its economy in 2025 with a mix of active fiscal policies and looser monetary strategies. Despite facing global challenges like geopolitical tensions and rising protectionism, China’s economic foundation remains strong, contributing nearly 30% to global growth.
Increasing Government Spending
One major step is expanding fiscal expenditure. By raising the fiscal deficit rate from 3% to around 3.5%-4%, China could unlock over 5 trillion yuan (about $686.6 billion) to stimulate demand and drive economic growth.
Investing in Key Sectors
The government plans to issue more special long-term bonds. These funds will support policies that encourage upgrades in equipment and trade-ins of consumer goods, boosting consumption, creating jobs, and enhancing economic security.
Focusing on People’s Needs
China aims to shift its fiscal focus from heavy investments to consumption-based policies. By investing more in healthcare, education, and support for vulnerable groups, the government hopes to reduce economic uncertainties and encourage people to spend more confidently.
Empowering Local Governments
Reforming the fiscal and taxation system will grant more financial autonomy to local authorities. Balancing responsibilities between central and local governments and boosting local revenues can promote sustainable development at the grassroots level.
Loosening Monetary Policies
On the monetary front, China plans to ensure sufficient liquidity by adopting a moderately loose policy. Reducing interest rates and reserve requirements could lower borrowing costs, making it easier for businesses and individuals to access funds and stimulate economic activity.
Maintaining Financial Stability
The central bank will continue to monitor financial risks and enhance macroprudential tools to keep the financial system stable. Coordinating fiscal and monetary policies can maximize their effectiveness in supporting the economy.
Through these strategies, China aims to overcome current challenges and lay a solid foundation for long-term prosperity.
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Active fiscal and loose monetary policies to foster China's economy
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