China’s Minister of Finance Lan Fo’an speaks during a press conference in Beijing on Nov. 8, 2024.
Adek Berry | Afp | Getty Images
BEIJING — China has more room to act on fiscal policy amid domestic and external uncertainties, Finance Minister Lan Fo’an told reporters on Thursday.
He was responding to a question during China’s “Two Sessions” annual parliamentary meeting about the country’s plans for proactive fiscal policy this year. The gathering this year comes as U.S. President Donald Trump has raised tariffs on Chinese goods for the second time in roughly a month. Beijing has responded to Washington’s latest levies with targeted duties and restrictions on U.S. companies.
China on Wednesday announced it was raising its on-budget deficit to 4% of the country’s gross domestic product — the highest since at least 2010.
The government also plans to issue 1.3 trillion yuan ($178.9 billion) in ultra-long-term special treasury bonds in 2025, marking a 300 billion yuan hike from last year. The increased amount is primarily set to support the consumer trade-in program.
China said it aims to issue 4.4 trillion yuan of local government special-purpose bonds this year — or a 500 billion yuan increase from last year — to help ease the financial strains of local authorities.
China has made spurring consumption its top priority for the year ahead, according to a government work report shared Wednesday. Zheng Shanjie, head of the National Development and Reform Commission, the top economic planner, on Thursday said that a more detailed plan for boosting consumption would be released soon.
The country on Wednesday also said it would target a GDP increase of around 5% this year, while lowering its inflation target to 2% — the lowest in around 20 years.
“China has delivered a pro-growth message here at the [National People’s Congress], in line with expectations,” said Aaron Costello, head of Asia at Cambridge Associates. The NPC is part of the “Two Sessions” meeting.
Costello noted that, beyond specific stimulus programs, the bigger issue facing China has been low business and consumer sentiment. He pointed to encouraging signals such as Chinese President Xi Jinping’s meeting with many tech entrepreneurs last month to encourage private business growth.
Rising trade tensions
Officials speaking on Wednesday and Thursday have emphasized that it will take hard work for China to reach its 5% target. China’s economy grew by 5% last year, but benefitted from strong exports that offset lackluster consumption and the drag from domestic real estate.
When asked about U.S. trade tensions, Minister of Commerce Wang Wentao reiterated Beijing’s strong language on the trade tensions, but called for the two sides to meet soon for discussions.
Other officials speaking Thursday did not name U.S. trade dealings explicitly, but a few made uncharacteristic public allusions to the White House’s growing restrictions on China. The U.S. has blacklisted several major Chinese tech companies and limited their access advanced semiconductors for training artificial intelligence models.
“The more others pressure us, block us, it will only push us to innovate independently,” Zheng said in Mandarin, translated by CNBC. He spoke while talking up China’s exports of integrated circuits and robotic development.
When laying out measures to support technological development, the head of China’s central bank, Pan Gongsheng, said that, while the country welcomed foreign investors, it “opposed the establishment of improper investment barriers.”