Higher deficit to scale up fiscal firepower

增加赤字以扩大财政火力

A more proactive fiscal policy toolkit will play a bigger role in counter-cyclical adjustments in 2025 amid sluggish domestic demand, a tepid property market, and local government debt risks, as well as rising protectionism, to help the country tackle various challenges head-on and spur stable growth, analysts said.

在内需低迷、房地产市场不温不火、地方政府债务风险、保护主义抬头的情况下，更加积极的财政政策工具包将在2025年的逆周期调节中发挥更大作用，帮助国家正面应对各种挑战，刺激稳定增长。

A budget deficit of up to 4 percent of gross domestic product, the highest on record, could be considered along with increased issuance of local government special-purpose bonds and ultra-long special treasury debt, to anchor market expectations, boost domestic demand, and weather external shocks, they added.

他们补充说，可以考虑将预算赤字提高到国内生产总值的4%，这是有记录以来的最高水平，同时增加地方政府专项债券和超长期特别国债的发行，以锚定市场预期，提振内需，抵御外部冲击。

The annual Central Economic Work Conference, where the nation's policymakers set the policy agenda for the world's second-largest economy in mid-December, charted a "more proactive" fiscal policy in 2025 for the first time, explicitly noting "an increase in its deficit ratio".

12月中旬，中国政策制定者在一年一度的中央经济工作会议上为世界第二大经济体制定了政策议程，首次制定了2025年“更加积极”的财政政策，明确指出“赤字率”。

Details surrounding the annual fiscal deficit target are usually unveiled in March during the annual meeting of the National People's Congress — the country's top legislature, said Guan Tao, global chief economist at BOCI China.

中银国际中国全球首席经济学家管涛表示，有关年度财政赤字目标的细节通常会在3月份中国最高立法机构全国人民代表大会年度会议期间公布。

However, the recent meeting's clear policy direction came as the authorities felt the need to act swiftly and communicate their fiscal plans more transparently to shore up market confidence as the economy is facing severe headwinds, Guan said.

然而，关说，最近会议明确的政策方向是因为当局认为有必要迅速采取行动，更透明地传达其财政计划，以在经济面临严重阻力的情况下提振市场信心。

Since the deficit ratio was set at 3 percent for 2024, analysts predict the figure could reach 3.5 to 4 percent in 2025, which will be officially announced at the NPC meeting in March.

由于2024年赤字率定为3%，分析师预测2025年这一数字可能达到3.5%至4%，这将在3月份的NPC会议上正式宣布。

"The fiscal deficit ratio holds a special significance compared to other fiscal policy tools, as people often gauge the government's policy stance based on this specific indicator," said Luo Zhiheng, chief economist at Yuekai Securities.

粤开证券首席经济学家罗志恒表示：“与其他财政政策工具相比，财政赤字率具有特殊意义，因为人们通常根据这一特定指标来衡量政府的政策立场。”

China has the policy room to raise the deficit ratio to 3.5 percent or even up to 4 percent, so as to scale up its fiscal firepower available to drive domestic demand and economic stability, and provide much-needed relief to local governments, Luo said.

罗说，中国有政策空间将赤字率提高到3.5%，甚至4%，以扩大其财政火力，推动内需和经济稳定，并为地方政府提供急需的救济。

Funding the deficit expansion through government bond issuances can translate into faster spending and more direct support for local economies, as they face fewer constraints in terms of their usage compared with special treasury bonds and local government special-purpose bonds, Luo added.

罗补充说，通过发行政府债券为赤字扩张提供资金可以转化为更快的支出和对地方经济更直接的支持，因为与特别国债和地方政府专项债券相比，地方经济在使用方面面临的限制更少。

However, the deficit ratio alone does not adequately capture the true extent of the government's policy actions.

然而，赤字率本身并不能充分反映政府政策行动的真实程度。

The deficit number in China's general public budget account is just one piece of the puzzle. Special treasury bonds and local government special-purpose bonds, which are classified under government-managed funds, are not included in this deficit calculation, said Zhang Jun, chief economist of China Galaxy Securities.

中国一般公共预算账户中的赤字数字只是拼图中的一块。中国银河证券首席经济学家张军表示，属于政府管理资金的特别国债和地方政府专项债券不包括在此次赤字计算中。

Over the past three years, the sluggish property and land markets have led to a significant drop in land sales revenue, which accounts for a large portion of government-managed fund revenue, Zhang said.

张说，过去三年，房地产和土地市场的低迷导致土地销售收入大幅下降，而土地销售收入占政府管理基金收入的很大一部分。

The drop in land-based revenue has put pressure on government-managed funds, prompting China to turn to alternative financing channels. To stabilize government-managed fund expenditures, China has increased the issuance of special treasury bonds and expanded the quota for local government special-purpose bonds, Zhang added.

陆基收入的下降给政府管理的基金带来压力，促使中国转向替代性融资渠道。张补充说，为了稳定政府性基金支出，中国增加了特别国债的发行，并扩大了地方政府专项债券的额度。

In the first 10 months of 2024, China's government-managed fund budget expenditures declined by 2.6 percent year-on-year, reaching around 8.1 trillion yuan ($1.1 trillion). This came against the backdrop of a significant 22.4 percent plunge in land sales revenue during the same period, according to data from the Ministry of Finance.

2024年前10个月，中国政府管理的基金预算支出同比下降2.6%，达到约8.1万亿元人民币（1.1万亿美元）。根据财政部的数据，同期土地销售收入大幅下降22.4%。

The narrowing of expenditure decline can be attributed to the issuance of 1 trillion yuan in ultra-long-term special treasury bonds and nearly 4 trillion yuan in new special local government bonds last year, Zhang said.

张说，支出降幅收窄可归因于去年发行了1万亿元超长期特别国债和近4万亿元新增地方政府特别债券。

The usage of local government special-purpose bonds, as outlined during the meeting of the Political Bureau of the Communist Party of China Central Committee in mid-December, will extend to purchasing idle land resources, increasing land reserves, and acquiring existing commercial housing units for government-subsidized housing purposes.

正如12月中旬中共中央政治局会议期间概述的那样，地方政府专项债券的用途将扩展到购买闲置土地资源、增加土地储备以及收购用于政府补贴住房目的的现有商品房。

This expansion of usage scope, combined with the previously announced 800 billion yuan quota specifically for debt reduction, has led experts to forecast that the new quota for local government special-purpose bonds in 2025 will exceed 4 trillion yuan.

此次扩大使用范围，结合此前公布的8000亿元专门用于减债的额度，专家预测2025年地方政府专项债新增额度将超过4万亿元。

Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, said that local government land sales revenue is likely to see negative growth again this year, which will weigh on government-managed fund expenditures.

金信国际首席宏观经济分析师王青表示，今年地方政府卖地收入很可能再次出现负增长，这将拖累政府性基金支出。

However, the new issuance of special-purpose bonds, in addition to the debt reduction quota, is expected to increase to between 4.5 and 5 trillion yuan this year, Wang said, stressing that this substantial increase, which sits outside the regular public budget, is set to play a crucial role in supporting government fund expenditures and offsetting the decline in land-based revenue.

然而，王说，除了债务削减配额外，今年新发行的专项债券预计将增加到4.5万亿元至5万亿元之间，并强调这一不属于常规公共预算的大幅增长将在支持政府性基金支出和抵消土地收入下降方面发挥至关重要的作用。

Compared to special local government bonds, which are a more traditional policy instrument, special treasury bonds can enhance the effectiveness of fiscal policies and deliver precise, tailored solutions to the challenges facing the economy, analysts said.

分析师表示，与地方政府特别债券这一更传统的政策工具相比，特别国债可以增强财政政策的有效性，并为经济面临的挑战提供精确、量身定制的解决方案。

The volume of ultra-long special treasury bonds — typically those with a tenor of more than 10 years — is expected to increase from the current 1 trillion yuan to between 1.5 and 2 trillion yuan in 2025, said Zhang of China Galaxy Securities.

中国银河证券的张表示，超长特别国债（通常期限超过10年）的规模预计将从目前的1万亿元人民币增加到2025年的1.5至2万亿元人民币。

The country is also expected to issue 1 trillion yuan of special treasury bonds to support State-owned large commercial banks in replenishing their Tier-1 core capital, enhancing their ability to withstand risks and increasing credit extension, thereby better serving the real economy, Zhang said.

张说，预计国家还将发行1万亿元特别国债，支持国有大型商业银行补充一级核心资本，增强抵御风险的能力，增加信贷投放，从而更好地服务实体经济。

Tier-1 core capital refers to the core capital held in a bank's reserves, including common stock and disclosed reserves.

一级核心资本是指银行准备金中持有的核心资本，包括普通股和已披露的准备金。

When observing the strength of China's proactive fiscal policy, the adjustment of expenditure structure is just as important as the expansion of spending volume, analysts said.

分析人士表示，在观察中国积极财政政策的力度时，支出结构的调整与支出体量的扩大同样重要。

To optimize the fiscal spending structure, policy focus is transitioning from being primarily investment-driven to now placing equal importance on both investment and consumption, said Luo of Yuekai Securities.

粤开证券的罗表示，为了优化财政支出结构，政策重点正在从主要投资驱动转变为投资和消费并重。

Investment and consumption are the yin and yang of domestic demand — it's not an either-or situation, the goal is to find the optimal mix of the two complementary forces to ensure well-rounded growth, Luo said.

罗说，投资和消费是内需的阴阳两极，这不是非此即彼的情况，目标是找到这两种互补力量的最佳组合，以确保全面增长。

Infrastructure investment must be coupled with considerations around population mobility, structural changes, and boosting the economy's potential growth rate, Luo said, adding that fiscal spending needs to be increased in areas such as healthcare, education, and elderly care.

罗说，基础设施投资必须与人口流动、结构变化和提高经济潜在增长率相结合，并补充说，需要在医疗、教育和老年人护理等领域增加财政支出。

This increased focus on social welfare expenditures is closely linked to China's ongoing urbanization efforts and the integration of migrant workers into the urban economy, to boost their willingness to spend, Luo said.

罗说，这种对社会福利支出的日益关注与中国正在进行的城市化努力和农民工融入城市经济密切相关，以提高他们的消费意愿。

Meanwhile, the trade-in policy for consumer goods, which provides incentives from fiscal spending for consumers to replace older products, has already shown clear signs of positive outcomes, Luo said.

与此同时，消费品以旧换新政策已经显示出明显的积极成果，罗说，该政策从财政支出中为消费者更换旧产品提供激励。

The trade-in policy had driven over 1 trillion yuan in related product sales as of Dec 13, contributing to the sale of over 5.2 million passenger vehicles, as well as the purchase of more than 49 million units of household appliances, data from the Ministry of Commerce show.

商务部数据显示，截至12月13日，以旧换新政策已带动相关产品销售额超过1万亿元，带动乘用车销售超过520万辆，家用电器购买超过4900万台。

In 2025, policymakers should encompass a wider range of consumer products under the trade-in programs, allowing more households to participate in and benefit from the initiative, Luo added.

罗补充说，到2025年，政策制定者应将更广泛的消费品纳入以旧换新计划，让更多家庭参与并受益于该计划。

Given the uncertainty surrounding fiscal revenue and the pace of special bond issuances, policymakers should be prepared to promptly augment budgets within the year to accelerate expenditure growth and better leverage the counter-cyclical function of fiscal policy, Luo added.

罗补充说，鉴于财政收入和专项债券发行步伐的不确定性，政策制定者应准备在年内及时增加预算，以加快支出增长，更好地发挥财政政策的逆周期功能。