Fiscal policy will focus on stimulating domestic demand (Opinion)

The Central Economic Work Conference highlighted the need to implement more proactive macroeconomic policies to develop domestic demand. To this end, China will increase the public deficit ratio, local government special bond quota and issuance of ultra-long-term special bonds to expand domestic demand and stabilize the economy next year .

The Chinese government’s highest deficit rate in recent years was 3.8% in 2023. The budget deficit rate in 2025 may reach around 4%. In addition, the quota of local government special bonds this year amounts to 3.9 trillion yuan ($534.5 billion), and the quota of new special bonds is expected to reach more than 4 trillion yuan per year. next year. The investment areas of bonds could be expanded to localized bonds and acquisition of real estate, and the scope of their use as project capital is also expected to expand.

Allowing local governments to spend special bond revenues to purchase unused homes can help stimulate real estate market demand and promote stabilization of the real estate sector.

The increase in very long-term special bonds will be used for the implementation of major strategies linked to a new quality productive force, urban-rural integration, regional coordination and the livelihoods of the population, as well as building security capabilities in key areas.

The role of trade in equipment and consumer goods in the growth of consumption and investment is obvious. Next year, special ultra-long-term Treasury bond funds used to support these efforts are expected to increase significantly.

The government will also increase the intensity of budget expenditures, optimize the structure of budget expenditures, and strengthen the guarantee of key areas of people’s livelihood. Only by increasing residents’ income and stabilizing social expectations can the government effectively stimulate residents’ consumption capacity.

Furthermore, the government should further optimize its spending structure to devote more resources to transforming and upgrading key areas such as emerging industries and traditional industries.

To this end, authorities should further strengthen coordination and cooperation between fiscal, monetary and industrial policies in various fields to form policy synergy and ensure the real effect of the policy.

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