China is on the verge of significant economic transformations. Amidst weak consumption and a real estate crisis, the country's government announced ambitious plans for 2025, aimed at stabilizing the economy and stimulating domestic demand.
Increasing Deficits to Revive Consumption
China announced a 'more active' budget policy for 2025, marking a significant change in economic management. This decision was presented at a two-day national conference on budgetary work, concluded on December 24, 2024. Finance Minister Lan Fo’An stated that this new orientation aims to 'promote consumption' to strengthen the financial resources of local communities. The government plans to increase state bond issuances, provide increased financial support to local governments, and reassess social benefits. These measures face major structural challenges, including a real estate sector crisis and high youth unemployment.
An Industrial and Technological Recovery Strategy
The new Chinese budget plan, while emphasizing social measures, fits into a broader strategy aimed at strengthening the role of industry and technology. President Xi Jinping highlighted the importance of innovation and technological development in enhancing competitiveness. This priority is accompanied by fiscal and monetary relaxations to alleviate corporate pressure and stimulate exports. However, economists argue that without direct actions to support households and boost demand, the impact of these measures could remain partial.
Conclusions and Risks of China's New Strategy
China shows a determination to overcome global economic instability through budget policy consolidation. However, this ambition comes with risks, such as rising debt and internal imbalances. The success or failure of this economic strategy could define the development of China's economy for the coming years.
China is aiming to stabilize its economy through substantial reforms, including support for consumption and innovations. However, the implementation of these plans carries numerous internal and external challenges, potentially affecting the country's success on the international stage.
