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China is at a major economic turning point. While the combined effects of sluggish consumption, an increased real estate crisis and high unemployment are hampering its development, Beijing has just announced an ambitious budget policy for 2025. The stated goal is clear: to stimulate domestic demand and stabilize an economy exposed to strong pressures. To achieve these ambitions, the government is planning a significant increase in public spending associated with the revision of its fiscal priorities. These measures, detailed at a national conference, reflect a strong desire to support local communities, extend social benefits and strengthen the resources of struggling businesses. Structured around innovation and strategic technologies, this strategy also aims to revive trade with respect to the adjustment of debt rules. With this comprehensive approach, Beijing intends to lay the foundations for more resilient economic growth and respond to the structural challenges that hinder its trajectory.
Increasing the deficit to increase consumption
China has announced a fiscal policy labeled “more active” for 2025, marking a significant change in its economic management. The decision was presented at the end of the two-day national conference on budget work, which ended this Tuesday, December 24, 2024. According to Finance Minister Lan Fo’An, the new orientation aims to “promote consumption” in order to strengthen the financial resources of local authorities. Against a backdrop of fragile domestic demand, these initiatives aim to restore momentum to an economy seeking stability.
To achieve this goal, the government plans to increase the issuance of government bonds, increase the financial support of self-government and increase social benefits. These measures complement previous efforts such as lowering interest rates and easing debt rules. However, these early reforms have proven insufficient in the face of major structural challenges, including the ongoing crisis in the real estate sector and high youth unemployment. The new budget plan therefore aims to overcome these obstacles and pursue a growth target set at 5% for 2025. However, this ambition remains cautious as the IMF estimates that growth could peak at 4.5%, reflecting the limits of current economic measures. .
Industrial and technological strategy at the heart of recovery
China’s new budget plan, while emphasizing social measures, is part of a broader strategic vision to consolidate the role of industry and technology at the heart of the national economy. President Xi Jinping thus emphasized the paramount importance of innovation and technological development for strengthening the country’s competitiveness. This priority is accompanied by fiscal and monetary easing to ease pressure on struggling businesses and stimulate exports, which are still seen as a central pillar of economic growth.
At the same time, this budgetary orientation reflects a clear ambition to reorient the economy to sectors with high added value. By diversifying its growth engines, China is trying to reduce its reliance on domestic consumption, which remains below pre-pandemic levels. However, there are critical voices among economists who warn of the limits of these reforms. According to them, without direct actions to support households and strengthen demand, the impact of these measures will remain partial. Long-term outcomes will therefore depend on Beijing’s ability to balance structural investment with immediate consumption support and maintain an ambitious course of major transformation of its economy.
By consolidating its fiscal policy, China is showing its determination to overcome a global situation marked by uncertainty. However, this ambition is not without risks. Challenges associated with rising debt and internal economic imbalances could weaken the expected results. On the international stage, this strategy could reposition Beijing as a key economic player capable of influencing global trade interactions. However, China’s ability to translate these intentions into concrete results will depend on the effectiveness of the reforms implemented and their compatibility with market and household expectations. The success or failure of this economic bet could redefine the contours of China’s growth in the coming years.
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A graduate of Sciences Po Toulouse and holder of the blockchain consultant certification issued by Alyra, I joined the Cointribune adventure in 2019. Convinced of the potential of blockchain to transform many sectors of the economy, I made a commitment to raise awareness and inform the general public about this ever-evolving ecosystem. My goal is to enable everyone to better understand blockchain and take advantage of the opportunities it offers. Every day I try to provide an objective analysis of current events, decipher market trends, convey the latest technological innovations and put into perspective the economic and social problems of this ongoing revolution.
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The comments and opinions expressed in this article are solely those of the author and should not be considered investment advice. Before making any investment decision, do your own research.