China has set its highest deficit ratio in history – 4 per cent this year, allowing for more government spending than under the traditional 3 per cent – as the country looks to expand its fiscal horizons to meet its goals for economic growth and offset US tariff hikes.
Released along with other major annual benchmarks in the annual government work report, the higher deficit ceiling is seen by analysts as foundational to the policy framework being crafted in response to a resurgent trade war presided over by US President Donald Trump.
“They will use stimulus to offset tariffs, so China can grow at ‘around 5 per cent’ in 2025,” said Larry Hu, chief China economist at Macquarie Capital, referring to the target for gross domestic product growth. Both benchmarks were revealed by Premier Li Qiang on Wednesday during the opening session of China’s top legislature, the National People’s Congress.
The single percentage point increase in the deficit ratio represents a rise of 1.6 trillion yuan (US$219.9 billion) in the country’s overall deficit level, Li said, for a ceiling of 5.66 trillion yuan.
