Finance Minister Lan Fo’an states that China has increased its fiscal policy flexibility under ongoing global uncertainties. The nation has raised its budget deficit target to 4% of GDP, introduced significant treasury bonds, and set a GDP growth target of around 5% for the year. The government is prioritizing consumer consumption and addressing trade tensions with the U.S. through dialogue and innovation.

Recently, China’s Finance Minister, Lan Fo’an, indicated the nation has considerable flexibility in its fiscal policy amid both domestic and global uncertainties. This statement was made during the annual “Two Sessions” parliamentary meeting, coinciding with increased tensions over U.S. tariffs on Chinese goods. Consequently, China announced an increase in its on-budget deficit target to 4% of GDP, the highest level since at least 2010.

In addition to the deficit increase, the Chinese government plans to issue 1.3 trillion yuan, approximately $178.9 billion, in ultra-long-term special treasury bonds in 2025. This amount reflects a 300 billion yuan increment from the previous year, primarily aimed at bolstering consumer trade-in programs. Furthermore, the government aims to issue 4.4 trillion yuan in local government special-purpose bonds this year, representing an additional 500 billion yuan from last year to alleviate local authorities’ financial pressures.

The prioritization of consumer spending marks a pivotal shift in China’s economic strategy, as emphasized in a government work report. Zheng Shanjie, head of the National Development and Reform Commission, announced that a comprehensive plan to enhance consumption will be shared shortly. In addition, China is projecting a GDP growth rate target of approximately 5% for this year, alongside a decreased inflation target set at 2%, the lowest in two decades.

According to Aaron Costello, head of Asia at Cambridge Associates, the government has effectively communicated a pro-growth agenda through its announcements at the National People’s Congress. However, he remarked on the notable challenge of improving business and consumer sentiment. Encouragingly, President Xi Jinping recently met with numerous technology entrepreneurs to promote private sector expansion.

During discussions on trade tensions with the U.S., Commerce Minister Wang Wentao reiterated Beijing’s firm stance on these issues, also advocating for the resumption of dialogue between the two countries. Officials also highlighted the growing restrictions imposed by the U.S., which have impacted several Chinese tech companies by limiting their access to advanced semiconductors.

Zheng noted, “The more others pressure us, block us, it will only push us to innovate independently.” He highlighted the advances in China’s exports of integrated circuits and robotics development. Furthermore, Pan Gongsheng, head of China’s central bank, expressed support for foreign investments while firmly opposing unwarranted investment barriers.

In summary, China is navigating fiscal policy adjustments amid rising uncertainties on both domestic and international fronts. The government’s proactive measures, such as increasing the budget deficit and enhancing consumer spending, reflect a strategic intent to bolster economic growth. Despite trade tensions with the U.S., officials emphasize innovation and dialogue as pathways to stability and development in the tech sector. The focus on consumption and investment plans underscores the Chinese administration’s commitment to fostering economic resilience.

Original Source: www.nbcmiami.com

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