China to Expand Domestic Demand in All Areas
"Fiscal policy direction for 2025 is clear and explicit, fully considering the need for increased counter-cyclical adjustment, which is very positive," said Liao Min, Vice Minister of Finance, at a press conference held by the State Council Information Office on January 10. He mentioned that the fiscal deficit scale in 2025 will increase significantly, with a larger amount of government bonds to provide more support for stabilizing growth and adjusting the structure. At the same time, the Ministry of Finance will strengthen efforts to boost consumption, improve investment efficiency, and comprehensively expand domestic demand.
Expand the Scale of Super-Long-Term Special Government Bonds
Liao Min stated that in response to the needs of macroeconomic counter-cyclical regulation, the fiscal deficit rate in 2025 will be raised, and the deficit scale will increase significantly. The deficit rate for 2025 will be announced to the public after following the statutory procedures.
He explained that China has substantial room for borrowing and increasing the deficit. From a medium- to long-term perspective, China’s economy still has high growth potential. First, China’s government debt ratio is significantly lower than that of major economies and emerging markets, and the overall fiscal situation is healthy and sustainable. Second, China’s government debt corresponds to a large amount of high-quality assets, which provide both social and economic benefits. Additionally, the current real interest rate on China’s national debt is notably lower than the actual growth rate of its economy. Therefore, government borrowing is sustainable.
"Increasing the fiscal deficit rate will inject more momentum into economic development this year," said Liao Min. He explained that after the deficit rate is increased, more fiscal space can be utilized to expand the scale of fiscal expenditure and strengthen counter-cyclical regulation. With the increase in the deficit rate and the multiplier effect of fiscal policies, more bank loans and social capital investment will be driven, thereby promoting an increase in effective demand. More funds can be used to support employment, consumption, technological innovation, economic structure adjustments, and contribute to high-quality development and the sustained healthy development of the economy and society.
Regarding government bonds, Liao Min mentioned that the government will arrange for a larger scale of government bonds to provide more support for stabilizing growth and adjusting the structure. The scale of super-long-term special government bonds will be expanded, with stronger support for "dual-weighted" projects and greater efforts to implement "two new" policies. The issuance limit for new local government special bonds will be increased, with a broader range of investment fields and capital uses to drive effective investment and support infrastructure strengthening, improving weak links, and promoting development. Special government bonds will also be issued to support large state-owned banks in replenishing their Tier 1 capital, enhancing these banks' credit capacity to serve the real economy and more sustainably support the expansion of effective demand and economic structure adjustments.
Increase Investment and Improve Investment Efficiency
Liao Min emphasized that in 2025, the Ministry of Finance will intensify efforts to support the boosting of consumption, improve investment efficiency, and comprehensively expand domestic demand.
On consumption, Liao Min explained that multiple channels will be used to increase residents' employment and income, thereby enhancing their actual consumption capacity. Efforts will be made to further expand the scope of the policy for replacing old consumer goods with new ones, optimize the subsidy application process, and improve the recycling system to stimulate more mass consumption needed by the public. Fiscal and tax policies will be leveraged to support the development of new industries such as the elderly care services and cultural tourism industries, improve related infrastructure, enhance public service levels, and support the cultivation of newer consumption industries and scenarios. Pilot projects for modern commerce and circulation systems will be implemented, with actions taken to enhance national comprehensive freight hub networks and promote the digital transformation of highway and waterway transport infrastructure, reducing logistics costs.
"Government investment funds must be used effectively, with a focus on key areas and weak links, and efforts should be made to increase investment and improve investment efficiency," Liao Min said. Besides issuing more super-long-term special government bonds and increasing the issuance of local government special bonds, the central government's budgetary investment scale will also be moderately increased, with reasonable arrangements for the allocation and focus of investments. In the execution phase, bond issuance will follow procedures, funds will be allocated promptly, and investments will be broken down into specific projects to create tangible outcomes as soon as possible. This will lead to more bank loans and social investments, supporting the stabilization of the overall economy.
Moreover, the Ministry of Finance will continue to strengthen support for ensuring employment and safeguarding people's livelihood, implementing and improving policy measures. Lin Zechang, Director of the Ministry’s Comprehensive Department, introduced that policies to stabilize employment and promote jobs will continue, including phased reductions in social insurance rates and one-time job expansion subsidies, aimed at reducing business operational costs. New measures to expand employment will also be introduced, in collaboration with relevant departments, to support key sectors, including the cultural tourism industry and other modern services, as well as foreign trade.
2025 Debt Swap Bonds Have Started Issuance
Regarding debt reduction progress, Wang Jianfan, Director of the Ministry of Finance’s Budget Department, introduced that the 2 trillion yuan of debt swap bonds for 2024 had been fully issued by December 18 of that year, and most regions have already fully used these funds. The issuance work for the 2 trillion yuan quota for 2025 has now started.
Moving forward, the Ministry of Finance will work with relevant departments to ensure the effective implementation of policies. They will guide the use of central support policies, address new issues arising in local debt reduction, promote successful local debt reduction experiences, and accelerate the resolution of existing hidden debts.
At the same time, full-process supervision of bond funds will be strengthened to ensure compliance. The Ministry will guide local governments to establish detailed accounts for hidden debt replacement, accurately record the issuance, use, repayment, and interest of bonds, and ensure all funds are managed and accounted for separately, operating in a closed system.
The Ministry will also maintain a strict "zero tolerance" stance on hidden debt, resolutely preventing the addition of new hidden debt and pushing for the "cleaning up" of existing debts. The Ministry will continue high-pressure supervision, work on collaborative regulatory efforts across departments, and deal severely with illegal borrowing and false debt reduction practices. The transformation and reform of financing platforms will be accelerated, with a firm stance to block illegal borrowing channels at the local level and promote sustainable development.
To stabilize the real estate market and prevent further decline, Lin Zechang stated that within the newly issued special bond quotas for 2025, local governments may allocate bonds for land reserves and the purchase of existing homes to be used for affordable housing projects. The Ministry of Finance will work with relevant departments to clarify policies to support the acquisition of existing homes for affordable housing.
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