At the 2025 China Development Forum, Minister of Finance Lan Fo’an outlined China’s fiscal policy strategy, emphasizing a more proactive and coordinated approach to ensure economic stability and long-term growth. With a deficit rate of 4%, a fiscal deficit of 5.66 trillion yuan, and public budget expenditures reaching 29.7 trillion yuan, the government’s policy framework is designed to boost consumption, stimulate investment, support innovation, and manage financial risks.
A Coordinated Policy Approach
China’s fiscal policy for 2025 aims to deploy a “combination punch” of measures, integrating fiscal, monetary, industrial, and regional strategies to enhance effectiveness. This approach seeks to address structural economic challenges while providing targeted financial support to key sectors. By utilizing government bonds, fiscal interest discounts, special funds, and preferential tax policies, the government intends to strengthen coordination between different policy tools to optimize economic outcomes.
The policy focus this year will be on addressing weak links in high-quality development and resolving bottlenecks in the economic cycle. Policymakers aim to introduce measures swiftly, aligning policy implementation with market expectations to maximize impact.
Strengthening Domestic Demand and Consumption
Boosting domestic consumption is a key priority for 2025. While China has one of the largest consumer markets in the world, unlocking its full potential remains essential for sustained economic growth. To stimulate spending, the government is taking direct action through fiscal stimulus and social benefits.
A significant portion of the 1.3 trillion yuan in ultra-long-term special treasury bonds will be allocated to consumer stimulus, with 300 billion yuan specifically designated for financing trade-ins of consumer goods. The budget for consumer trade-in subsidies has doubled compared to the previous year, reaching 150 billion yuan, aiming to lower costs for consumers and increase purchasing power.
To further enhance consumer confidence, the government is increasing pension payments, expanding medical subsidies, and supporting the development of the “silver economy” to cater to China’s aging population. These measures are expected to reduce financial burdens on households, encouraging higher discretionary spending and strengthening economic circulation.
Investment in Infrastructure and Industrial Upgrades
Investment remains a central pillar of China’s economic strategy, with a strong emphasis on efficiency and long-term impact. The government has introduced a new management mechanism for special bonds, granting local governments greater autonomy in allocating resources based on regional economic priorities. This policy is designed to mobilize private investment and leverage broader social capital to sustain economic momentum.
Public funds will be directed toward high-priority infrastructure projects, technological advancements, and industrial modernization. The focus will be on “two-fold” projects, which encompass economic and social infrastructure, and “two new” policies that promote new industrial systems and digital transformation. These investments aim to reinforce China’s economic resilience while mitigating financial risks.
Driving Innovation and Technological Advancement
A central theme in China’s 2025 fiscal strategy is fostering new productive forces through technological innovation and industrial transformation. The government is increasing funding for research and development (R&D) to maintain a competitive edge in emerging fields such as artificial intelligence, green energy, and industrial automation.
Financial support mechanisms for scientific and technological research are being refined to ensure efficient allocation of funds. The government is also enhancing policies that support private sector innovation, encouraging small and medium-sized enterprises (SMEs) and foreign enterprises to participate in industrial advancements.
China aims to strengthen the link between technological research and industrial application, ensuring that scientific breakthroughs translate into tangible economic gains. The “Artificial Intelligence+” initiative will be expanded to accelerate AI-driven industrial transformation, positioning China as a global leader in advanced industries.
Managing Financial Risks and Ensuring Stability
While promoting growth, the government is also prioritizing financial risk management, particularly in the areas of local government debt, real estate stability, and corporate financing. Measures are being taken to address hidden debt risks through a structured replacement program, ensuring debts are restructured in a controlled and proactive manner.
The government is also advancing the market-oriented transformation of local financing platforms, aiming to limit new debt accumulation and enforce fiscal discipline. In the real estate sector, policies will continue to stabilize property prices and demand while promoting a sustainable housing model.
Enhanced financial oversight will play a crucial role in maintaining economic stability. The government plans to closely monitor fiscal and monetary policies, implement reforms in financial regulations, and improve corporate governance standards to prevent financial misconduct and safeguard investor confidence.
Creating a Favorable Business Environment
China’s fiscal policy framework includes measures to promote a higher level of economic openness, stabilize foreign trade, and attract foreign investment. The government has reaffirmed its commitment to treating all business entities—both domestic and foreign—equally in terms of policy support, particularly in government procurement.
Efforts to optimize the business environment will continue, ensuring that foreign enterprises can operate within a stable and transparent regulatory framework. By facilitating foreign investment and fostering collaboration in innovation-driven industries, China aims to strengthen its position as a global economic hub.
Outlook for 2025: Balancing Growth with Stability
With the ongoing implementation of a more active fiscal policy, coupled with other macroeconomic measures, China’s economy is expected to maintain its upward trajectory despite global uncertainties. The government remains confident in its ability to navigate challenges while ensuring long-term economic resilience.
Policymakers will continue to monitor domestic and international developments, adjusting their approach as needed to mitigate risks and maintain stability. The evolving fiscal landscape presents strategic opportunities for businesses and investors, making it essential for market participants to stay informed and adaptable in response to policy shifts.
China’s 2025 fiscal strategy reflects a carefully balanced approach, prioritizing growth, financial prudence, and innovation-driven development. As the country continues its transformation toward a high-quality economic model, businesses and investors should remain engaged with the changing dynamics of China’s economic policies.