China’s government has taken a bold step by maximizing the budget deficit. Investors are on alert. According to The Financial Times, China's budget deficit has lately been lifted to a record 4%. Experts believe this move will improve financial efficiency and help address several economic challenges.
Chinese Premier Li Qiang announced at the National People's Congress (NPC) that China’s budget deficit target for 2025 has been set at 4%. Speaking at the event, he emphasized that the Chinese government would pursue a "more proactive fiscal policy" to bolster economic growth. Notably, the 4% deficit is the highest in decades, as previous years saw this indicator remain below 3%.
Harry Murphy, a senior expert at Moody’s Analytics, said that the decision signals underlying economic challenges in China because the authorities gave up too early, allowing for such a high budget deficit.
Earlier, the government unveiled the document setting out the aim for a 5% GDP growth in 2025. The country's GDP expanded by 5.2% in 2023 and 5% in 2024. These figures indicate that China’s economy has been losing momentum.
China’s President Xi Jinping acknowledged that the national economy is facing numerous headwinds and challenges. "Moving forward, these issues are worsening because the external environment is getting more alarming," he added.
