China cranks up fiscal stimulus in cash-for-clunkers moment
Special treasury bonds will be used to fund large-scale equipment upgrades and consumer goods trade-ins, state officials have said
03 January, 2025
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China will sharply increase funding from ultra-long treasury bonds in 2025 to spur business investment and consumer-boosting initiatives, a state planner official said on Friday, as Beijing cranks up fiscal stimulus to revitalise the faltering economy.
Special treasury bonds will be used to fund large-scale equipment upgrades and consumer goods trade-ins, said Yuan Da, deputy secretary-general of National Development and Reform Commission (NDRC) at a press conference.
“The size of ultra-long special government bond funds will be sharply increased this year to intensify and expand the implementation of the two new initiatives,” Yuan said.
Under the programme launched last year, consumers can trade-in old cars or appliances and buy new ones at a discount, and a separate one that subsidises large-scale equipment upgrades for businesses.
Households also will be eligible for subsidies to buy three types of digital products this year, including cell phones, tablets, smart watches and bracelets, Yuan said.
In December, the NDRC said Beijing had fully allocated all proceeds from 1 trillion yuan ($136.68bn) in ultra-long special treasury bonds in 2024, with about 70 per cent of proceeds financing “two major projects” and the remainder going towards the new initiatives.
Chinese leaders have pledged to “vigorously” boost consumption this year, raising expectations of more policy steps to spur demand and fight deflationary risks.
Millions of government workers across China were given surprise wage increases this week, people affected by the move said, as Beijing looks to boost spending.
China will also increase funding from special treasury bonds and expand the scope for another programme that focuses on supporting key strategic sectors, Zhao Chenxin, vice head of the state planner told the press conference.
The government has approved projects for 2025 worth 100 billion yuan under this scheme in advance, he said.
The major programmes refer to projects such as construction of railways and airports, development of farmland, and building security capacity in key areas, according to official documents.
The world’s second-biggest economy has struggled over the past few years due to a severe property crisis, high local government debt and weak consumer demand. Exports, one of the few bright spots, could face more US tariffs under a second Donald Trump administration.
Reuters reported last month that authorities have agreed to issue 3 trillion yuan worth of special treasury bonds in 2025, which would be the highest on record.
Strong fiscal stimulus expected
China is likely to allow local governments to increase issuance of special bonds to 4.7 trillion yuan this year, up from 3.9 trillion yuan in 2024, said Zhang Ming, a senior economist at the Chinese Academy of Social Sciences, a top state think tank.
The combined special treasury and local bonds and the annual budget deficit could approach 13 trillion yuan this year, or 9-10 per cent of gross domestic product, Zhang said in an article published on the website of China Chief Economist Forum.
“Such a level of broad-based deficit would be rare in history,” Zhang said.
Reuters reported last month that Chinese leaders have agreed to raise the budget deficit to 4 per cent of GDP in 2025, China‘s highest on record, while maintaining an economic growth target of around 5 per cent.
NDRC’s Yuan said China had ample policy space to underpin growth this year.
“We are fully confident of driving continued economic recovery this year.”
China‘s central bank is likely to cut its key policy rate from the current level of 1.5 per cent “at an appropriate time” in 2025, the Financial Times reported on Friday citing comments the bank made to the newspaper, as part of Beijing’s efforts to shore up growth.
