MNI INTERVIEW: China Needs Further CNY3 Trn To Keep 5% GDP
MNI (BEIJING) - China will need to provide around an additional CNY3 trillion in fiscal funds in 2025 alongside greater economic reforms to maintain 5% GDP growth, a senior policy advisor told MNI, adding Beijing should raise the deficit-to-GDP ratio 100 basis points to about 4%.
Yu Miaojie, president at Liaoning University and a deputy to the National People's Congress, said that in addition to the expected CNY22-23 trillion of fiscal revenue this year, total fiscal funds available will amount to more than CNY33 trillion, up from about CNY30 trillion in 2024. “Except for resolving risks of local off-balance-sheet debts, these funds should be mainly invested in major infrastructure projects related to national security,” he said.
This would compare to total fiscal funds of about CNY30 trillion in 2024, stemming from a CNY4.06 trillion deficit, CNY1 trillion in special treasuries, CNY3.9 trillion of local government special bonds, and estimated CNY20-21 trillion in revenue.
CONSUMER SUPPORT
The National Development and Reform Commission revealed plans earlier this month to expand its consumer trade-in scheme to include electronic devices to support spending. Some advisors expect the funding support to grow by at least 50% from 2024’s CNY150 billion via special treasury bond issuance. (See MNI: Special Treasuries To Boost China's Consumers In 2025)
However, authorities should also support residential income especially for lower socioeconomic groups and prioritise full employment to boost consumption, Yu argued, noting increased healthcare subsidies and lower taxes and fees will help lift livelihoods and encourage spending.
M2 will grow due to looser monetary policy this year, but authorities should target about CNY260 trillion – or twice the level of GDP, Yu argued.
Authorities will also need to implement longer-lasting measures to boost demand, he added, pointing to the proposed creation of a unified domestic market.
Encouraging the free flow of high-quality labour, goods and services domestically will lift economic activity, but will require the removal of internal trade barriers, the implementation of cohesive regulations and nationwide standards, he said.
The Central Economic Work Conference in December identified the establishment of a unified national market, first proposed in 2013, as a key task for 2025.
OPENING UP
Beijing should shift its trade focus to the BRICS and Shanghai Cooperation Organisation amid U.S. tariff threats, as well as strengthening cooperation with Russia, said Yu, who also acts as a trade policy consultant to the Ministry of Commerce and participates in State Council economy advisory meetings. (See MNI INTERVIEW: China Preps For U.S. Tariffs, 10% Manageable)
China will continue to increase imports to improve supply, he added, and particularly of intermediate products in order to help domestic producers lower costs and increase profits.
Beijing could also agree to share electric vehicle technology with the EU in exchange for market access, he said, noting China’s carmakers will maintain competitiveness through continuous innovation.