Facing multiple headwinds both from internal and external, China is trying to make a meaningful policy shift to boost embattled economic growth by announcing plans to raise its fiscal deficit to “around 4%” of gross domestic product, which is a rare increase that marks a significant shift in policy.
The new deficit plan, which is up from 3% last year, comes amid an escalating trade war with U.S. President Donald Trump’s administration. An increase to 4% of GDP had been widely expected. It marks the highest fiscal deficit on record going back to 2010. The prior high was 3.6% in 2020.
China in November had announced a support package of 10 trillion yuan over five years — primarily to tackle local government debt problems.
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