- Priorities include financial support for businesses
- Policies to also focus on modernising industrial systems
Mysteel: China’s Ministry of Finance outlined its priorities for a more proactive fiscal policy in 2025, emphasising the need to expand domestic demand, boost consumption, enhance social welfare, increase household income through multiple channels, and support the trade-in of consumer goods, the ministry said in the 2024 China Fiscal Policy Implementation Report released this week.
Notably, the central government has placed expanding domestic demand, particularly stimulating consumption, at the forefront of its 2025 economic agenda. The ministry will also strengthen relief measures for businesses and optimise debt resolution policies to help local governments repay overdue payments to enterprises.
According to the report, fiscal measures to support consumption include increasing social security benefits, raising basic pensions for retirees, improving fiscal subsidies for basic medical insurance, promoting the development of a national logistics hub network, and upgrading the digitalisation of road and waterway transportation infrastructure to reduce overall logistics costs.
To drive effective investment, the ministry has highlighted the need to optimise government investment funds, focus on key sectors and weak links, and appropriately manage government bond issuance and ensure timely budget allocation for these funds to accelerate project implementation.
Fiscal policy will also play a key role in advancing the modernisation of China’s industrial system. The report outlines measures such as increasing central government investment in science and technology, supporting research on critical core technologies, enhancing key R&D programmes in manufacturing, promoting the high-quality development of key industrial supply chains, and providing financial incentives to specialised small and medium-sized enterprises (SMEs) to accelerate industrial transformation and upgrading.
The ministry also stressed the need to enhance financial support for businesses, optimise debt resolution policies, and help local governments repay overdue payments to enterprises. Efforts will also be made to alleviate financing difficulties for small and micro enterprises while cracking down on arbitrary fees, fines, and levies imposed on businesses.
In 2024, some government bond funds were allocated to assist local governments in settling outstanding payments. According to the report, RMB 400 billion ($55.1 billion) in local government debt quotas were allocated in 2024 to support qualified public investment projects and clear overdue payments. In addition, RMB 800 billion in newly issued special bonds were set aside to supplement local government funds, mitigate debt risks, and help clear outstanding obligations to enterprises.
One of the key focuses of China’s 2025 fiscal agenda is deepening fiscal and tax system reforms. The report reveals, for the first time, the goal of formulating policies to establish a modern budgetary system, including enhancing budget management through systematic and coordinated measures, promoting zero-based budgeting reforms, improving expenditure standard frameworks, assessing fiscal sustainability, and strengthening performance-based management.
With the easing of local government debt risks, the report reiterates the need to fully implement debt resolution policies, strictly curb new hidden debt, and effectively prevent and mitigate local government debt risks.
It also calls for accelerating reforms of local government financing platforms, enhancing fiscal oversight, and improving governance efficiency. The report further underscores the importance of identifying new hidden debt risks and enforcing strict accountability measures for illegal local government borrowing.
Note: This article has been written in accordance with a content exchange agreement between MySteel Global and BigMint.
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