China's aggressive fiscal strategy spurs growth, investment, and stability
China possesses the capacity to utilize fiscal tools in a synchronized and proactive way. Additionally, the central government demonstrates both financial flexibility and strategic discipline, enabling it to carry out economic interventions as necessary.
TroibNews 
**Editor's note:** Michael Wang is an anchor for CN's "Global Business" program. The article reflects the author's views and not necessarily those of CN.
As economic uncertainties, inflation, and escalating geopolitical risks affect the globe, China has introduced a potent fiscal response that carries significant implications both within the country and beyond.
During the government work report delivered to China's national legislature, Premier Li Qiang announced a pivotal shift to a "more proactive fiscal policy" for the first time.
By 2025, the country’s government debt is projected to reach 11.86 trillion yuan, representing an increase of 2.9 trillion yuan from the previous year.
The Premier described this increase as a "notably higher level of spending."
The deficit-to-GDP target is set to rise to 4 percent, up from 3 percent in 2024, surpassing levels observed during the COVID-19 pandemic. This indicates a strong intent to utilize fiscal strength to sustain economic momentum.
As part of this fiscal expansion, China will issue a record 1.3 trillion yuan in ultra-long-term special treasury bonds, which is an increase of 300 billion yuan compared to last year.
In addition, local governments will be authorized to issue 4.4 trillion yuan in special bonds, another record high.
This enhanced fiscal approach aims to inject liquidity, reduce financing costs, and stimulate economic activity to address uncertainties both globally and domestically.
Furthermore, it signifies the government's ongoing commitment to enhancing investment, improving industrial capacity, and stimulating domestic consumption.
Ultra-long-term special treasury bonds are a crucial element in China's fiscal strategy.
These unique bonds allow the government to finance large-scale national projects outside the regular budget, ensuring that the official deficit remains unaffected.
They are specifically designed to support long-term strategic initiatives tied to China’s modernization efforts.
In contrast to previous special treasury bond issuances, which were primarily reactive measures in times of crisis — such as recapitalizing banks after the 1997 Asian financial crisis or propping up the economy during the 2020 downturn — this current issuance of ultra-long bonds adopts a forward-thinking approach aimed at enhancing China’s technological capabilities, infrastructure resilience, and energy and food security.
With maturities ranging from 20 to 50 years, these bonds fund initiatives that are critical to achieving China’s technological self-sufficiency, transitioning to green energy, and modernizing infrastructure.
They are focused on key national strategies, including innovation in science and technology, integrated urban-rural development, coordinated regional progress, and sustainable population growth.
The issuance of ultra-long-term special treasury bonds is set to play a significant role in boosting investment and maintaining China's competitiveness in the global economy for years to come.
This year, the scope of ultra-long bond issuance will be extensive, with funds allocated across various strategic sectors.
Among the 1.3 trillion yuan in ultra-long-term special treasury bonds, 300 billion yuan will directly aid consumer goods trade-in programs, doubling the allocation from the previous year.
This allocation is designed to motivate households to trade in older items for new energy vehicles, home appliances, and digital devices.
The remaining one trillion yuan will focus on vital national strategies and industrial improvements.
Additionally, 500 billion yuan in special treasury bonds will be assigned to recapitalize state-owned banks, enhancing liquidity and lending capacities.
A more robust financial framework will provide increased credit access for businesses and households, further bolstering economic activity.
China’s more proactive fiscal policy this year is likely to have repercussions that extend beyond its own borders.
As the largest contributor to global GDP growth, China's economic performance significantly impacts international markets, trade partners, and investors.
Higher levels of consumption and investment are expected to drive increased imports of raw materials, high-tech components, and consumer goods, benefiting commodity-exporting countries, industrialized economies, and multinational corporations.
The expansion of transportation networks, energy grids, and roadways will boost demand for steel, copper, lithium, and advanced manufacturing tools, providing an uplift to global suppliers.
However, some analysts express concerns about the sustainability of China’s fiscal expansion.
China's central government debt remains relatively modest, providing ample fiscal capacity for increased borrowing without destabilizing the financial system.
Moreover, the majority of China’s debt is domestically held, which mitigates risks associated with foreign currency exposure and capital flight.
The bonds are specifically targeted towards projects anticipated to yield long-term economic returns, ensuring that current investments will support future growth.
Concerns have also been voiced regarding local government debt, noting that when combined with central government liabilities, the overall debt appears substantial.
Despite rising levels of local debt, Beijing has effectively managed these liabilities through comprehensive restructuring programs that transition high-risk obligations into more sustainable financing mechanisms.
The central government’s enhanced fiscal role, including increased transfers to local governments, has also decreased reliance on local borrowing.
Recent policy changes that allow local governments to utilize special-purpose bonds for debt repayment rather than exclusively for new projects indicate a shift towards a more sustainable debt framework.
Another distinguishing feature of China’s situation is that its debt is related to productive assets, such as transportation infrastructure, industrial parks, and technology hubs, which contribute to future economic output.
China has demonstrated its capacity to apply fiscal tools in a coordinated and forward-looking manner.
The central government possesses both the financial flexibility and strategic discipline necessary to implement timely economic interventions.
The shift to an "appropriately accommodative monetary policy" from a "prudent monetary policy" marks the first change in 14 years, allowing for fiscal stimulus to work in tandem with monetary easing and liquidity support.
Moreover, China’s fiscal plan for 2025 places a strong emphasis on efficiency and speed, ensuring that funds are allocated and deployed swiftly.
Policymakers are adopting a "strike fast and strike hard" strategy to maximize economic impact, minimizing any uncertainties.
In a climate of rising volatility and geopolitical tension in global markets, China’s proactive fiscal strategy offers a stabilizing influence, presenting both resilience and opportunity.
By directing resources towards long-term investments, fortifying financial stability, and enhancing domestic demand, China is solidifying its role as a principal engine of global growth.
While challenges persist, its ability to implement effective and progressive policies reaffirms its significance as a crucial anchor in an unpredictable economic environment.
Max Fischer for TROIB News
As economic uncertainties, inflation, and escalating geopolitical risks affect the globe, China has introduced a potent fiscal response that carries significant implications both within the country and beyond.
During the government work report delivered to China's national legislature, Premier Li Qiang announced a pivotal shift to a "more proactive fiscal policy" for the first time.
By 2025, the country’s government debt is projected to reach 11.86 trillion yuan, representing an increase of 2.9 trillion yuan from the previous year.
The Premier described this increase as a "notably higher level of spending."
The deficit-to-GDP target is set to rise to 4 percent, up from 3 percent in 2024, surpassing levels observed during the COVID-19 pandemic. This indicates a strong intent to utilize fiscal strength to sustain economic momentum.
As part of this fiscal expansion, China will issue a record 1.3 trillion yuan in ultra-long-term special treasury bonds, which is an increase of 300 billion yuan compared to last year.
In addition, local governments will be authorized to issue 4.4 trillion yuan in special bonds, another record high.
This enhanced fiscal approach aims to inject liquidity, reduce financing costs, and stimulate economic activity to address uncertainties both globally and domestically.
Furthermore, it signifies the government's ongoing commitment to enhancing investment, improving industrial capacity, and stimulating domestic consumption.
Ultra-long-term special treasury bonds are a crucial element in China's fiscal strategy.
These unique bonds allow the government to finance large-scale national projects outside the regular budget, ensuring that the official deficit remains unaffected.
They are specifically designed to support long-term strategic initiatives tied to China’s modernization efforts.
In contrast to previous special treasury bond issuances, which were primarily reactive measures in times of crisis — such as recapitalizing banks after the 1997 Asian financial crisis or propping up the economy during the 2020 downturn — this current issuance of ultra-long bonds adopts a forward-thinking approach aimed at enhancing China’s technological capabilities, infrastructure resilience, and energy and food security.
With maturities ranging from 20 to 50 years, these bonds fund initiatives that are critical to achieving China’s technological self-sufficiency, transitioning to green energy, and modernizing infrastructure.
They are focused on key national strategies, including innovation in science and technology, integrated urban-rural development, coordinated regional progress, and sustainable population growth.
The issuance of ultra-long-term special treasury bonds is set to play a significant role in boosting investment and maintaining China's competitiveness in the global economy for years to come.
This year, the scope of ultra-long bond issuance will be extensive, with funds allocated across various strategic sectors.
Among the 1.3 trillion yuan in ultra-long-term special treasury bonds, 300 billion yuan will directly aid consumer goods trade-in programs, doubling the allocation from the previous year.
This allocation is designed to motivate households to trade in older items for new energy vehicles, home appliances, and digital devices.
The remaining one trillion yuan will focus on vital national strategies and industrial improvements.
Additionally, 500 billion yuan in special treasury bonds will be assigned to recapitalize state-owned banks, enhancing liquidity and lending capacities.
A more robust financial framework will provide increased credit access for businesses and households, further bolstering economic activity.
China’s more proactive fiscal policy this year is likely to have repercussions that extend beyond its own borders.
As the largest contributor to global GDP growth, China's economic performance significantly impacts international markets, trade partners, and investors.
Higher levels of consumption and investment are expected to drive increased imports of raw materials, high-tech components, and consumer goods, benefiting commodity-exporting countries, industrialized economies, and multinational corporations.
The expansion of transportation networks, energy grids, and roadways will boost demand for steel, copper, lithium, and advanced manufacturing tools, providing an uplift to global suppliers.
However, some analysts express concerns about the sustainability of China’s fiscal expansion.
China's central government debt remains relatively modest, providing ample fiscal capacity for increased borrowing without destabilizing the financial system.
Moreover, the majority of China’s debt is domestically held, which mitigates risks associated with foreign currency exposure and capital flight.
The bonds are specifically targeted towards projects anticipated to yield long-term economic returns, ensuring that current investments will support future growth.
Concerns have also been voiced regarding local government debt, noting that when combined with central government liabilities, the overall debt appears substantial.
Despite rising levels of local debt, Beijing has effectively managed these liabilities through comprehensive restructuring programs that transition high-risk obligations into more sustainable financing mechanisms.
The central government’s enhanced fiscal role, including increased transfers to local governments, has also decreased reliance on local borrowing.
Recent policy changes that allow local governments to utilize special-purpose bonds for debt repayment rather than exclusively for new projects indicate a shift towards a more sustainable debt framework.
Another distinguishing feature of China’s situation is that its debt is related to productive assets, such as transportation infrastructure, industrial parks, and technology hubs, which contribute to future economic output.
China has demonstrated its capacity to apply fiscal tools in a coordinated and forward-looking manner.
The central government possesses both the financial flexibility and strategic discipline necessary to implement timely economic interventions.
The shift to an "appropriately accommodative monetary policy" from a "prudent monetary policy" marks the first change in 14 years, allowing for fiscal stimulus to work in tandem with monetary easing and liquidity support.
Moreover, China’s fiscal plan for 2025 places a strong emphasis on efficiency and speed, ensuring that funds are allocated and deployed swiftly.
Policymakers are adopting a "strike fast and strike hard" strategy to maximize economic impact, minimizing any uncertainties.
In a climate of rising volatility and geopolitical tension in global markets, China’s proactive fiscal strategy offers a stabilizing influence, presenting both resilience and opportunity.
By directing resources towards long-term investments, fortifying financial stability, and enhancing domestic demand, China is solidifying its role as a principal engine of global growth.
While challenges persist, its ability to implement effective and progressive policies reaffirms its significance as a crucial anchor in an unpredictable economic environment.
Max Fischer for TROIB News
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