China has signaled more borrowing and public spending in 2025 as it shifts focus from policy to consumption, stepping up stimulus to revive growth ahead of looming U.S. tariffs.
Senior officials led by President Xi Jinping also promised to increase the fiscal deficit target next year in an announcement made after a two-day meeting of the Central Economic Work Conference in Beijing, according to China Central Television.
China will make “vigorously increasing consumption” a top priority in 2025, along with other targets aimed at stimulating overall domestic demand, the state broadcaster said after the meeting setting the economic agenda for next year.
While the tone of the meeting is very growth-friendly, it lacks specific measures to boost consumption, said Larry Hu, head of China economics at Macquarie Group.
“I don’t think the government will distribute money directly to consumers,” he added. “The government is more likely to spend more. China will leverage the central government and increase public spending, so that overall demand can be high. That’s the big strategy.”
Officials also made a rare — albeit indirect — acknowledgment of the prolonged deflation plaguing China, promising to “ensure overall employment and price stability.” Prices across the economy have been falling for six consecutive quarters, the longest streak this century.
“Top leaders are now prioritizing increased consumption and investment in 2025, shifting the focus from the industrial modernization and innovation that dominated the statement to 2024,” said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle. This “pivot highlights the urgent need to increase domestic demand to better navigate external uncertainties.”
Risks ahead
China’s economic outlook for next year and beyond is increasingly uncertain, although the conference reaffirmed that the country is on track to meet the official growth target of “around 5%” this year.
The threat of a new trade war with the US with the return of Donald Trump means exports are likely to no longer be a major driver of growth. Domestic challenges are also piling up.
“Policy in 2025 will change to add support to the economy. The signs reinforce our view of the outlook for next year. In other words, growth still looks set to slow, with the stimulus providing a cushion,” said Chang Shu, David Qu and Eric Zhu of Bloomberg Economics.
Regarding consumption, the meeting offered few details about concrete political actions. Officials mentioned that a “special campaign” to boost consumer spending is underway, but did not elaborate further. They also promised to expand an existing program that encourages households to trade in old consumer goods, which many economists doubt will have a sustainable impact.
In addition to a larger budget deficit, China will also increase the issuance of special long-term treasury bonds and special local government notes next year, which are important sources for infrastructure investment and other public spending. The meeting did not provide details on the possible timing of further monetary easing.
