China Targets Record Deficit to Bolster Economy Amid Rising Global Pressures

China is gearing up for 2025 with its most expansive fiscal plan, raising the budget deficit to a record 4% of GDP to counter domestic challenges and looming trade tensions with the U.S.

This aggressive move, expected to inject 1.3 trillion yuan ($179.4 billion) into the economy through special bond issuances, reflects Beijing’s focus on stabilizing growth amid slowing momentum.

The economy faces mounting pressures from a property crisis, local government debt, and weakening consumer spending. Even exports, a key strength, are at risk as Donald Trump’s potential return to the White House revives fears of severe trade tariffs on Chinese goods, potentially slashing billions in export revenue.

Despite these challenges, China is targeting 5% GDP growth for 2025, prioritizing stability over aggressive expansion. The People’s Bank of China has also signaled a shift toward looser monetary policy, with potential rate cuts and liquidity injections. While these measures aim to prevent further economic slowdown, rising debt levels and global uncertainties will test Beijing’s strategy in the year ahead.

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Analysts caution that this fiscal push comes at a cost, with China’s debt burden already reaching unprecedented levels. Borrowing across households, businesses, and the government has skyrocketed in recent years, fueling concerns about long-term financial stability.

However, Beijing appears willing to take the risk, betting that a combination of fiscal and monetary tools will sustain growth and shield the economy from escalating global and domestic pressures.

Alexander Stefanov