(Bloomberg) -- Chinese state media said the country has room to increase its borrowing and fiscal deficit in 2025 as investors closely watch to see whether Beijing would use its fiscal firepower to top off stimulus in its key economic meeting next week.
China has been “relatively cautious” in setting its fiscal deficit ratio target, which was under 3% in most years and is significantly lower than other major economies, the official Xinhua News Agency wrote in a commentary on Friday. The commentary is the fourth installment in a series on the economy ahead of the annual Central Economic Work Conference next week. However, the Xinhua commentary didn’t indicate what the country’s deficit ratio target for 2025 might be.
China’s top leaders are expected to discuss raising the country’s deficit ratio next year to above 3% of its gross domestic product, while keeping next year’s growth goal in line with the 2024 target of around 5%. Last month Finance Minister Lan Fo’an had pledged to adopt a “more forceful” fiscal policy next year and “actively” use the room for to raise the official deficit, a sign that bolder steps could lie ahead.
Economists at UBS Group AG and Barclays Plc expected the leadership in Beijing may set a higher-than-usual deficit target of 3.5% to 4% of GDP, which would open the door to more central government borrowing to shore up the faltering economy. Raising the deficit-to-GDP ratio above 3% again would send a signal that China is breaking away from an implicit ceiling on the budget shortfall it’s long tried to keep to maintain fiscal discipline.
China’s government debt ratio is far below the global average and would give it more room to boost debt, according to the Xinhua commentary. The Chinese government debt ratio stood at 67.5% as of 2023, compared to the average of 118% among G-20 countries, Xinhua noted in the report, citing data from the International Monetary Fund.
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