Eight Need-to-Know Economic Takeaways from China's 2025 Congressional Event
China's new government debt set to exceed 10% of GDP
China just kicked off the most important event on its annual political calendar - the Two Sessions meeting of its national congressional bodies.
The Government Work Report delivered at the Two Sessions serves to define China’s economic agenda for the rest of the year.
In 2025, this will include far higher deficit spending to deliver the economic growth demanded by top Chinese policymakers.
Here are eight key economic takeaways from the event’s Government Work Report for 2025.
1: China has once again set its annual economic growth target at 5%.
This is the same as the targets for 2023 and 2024.
State-owned media said that the target remains “within the vicinity of China’s growth potential,” which policymakers expected to sit at around 5% throughout the course of the 14th Five Year Plan (2021 - 2025).
The goal is for China to hit mid-tier developed nation status by 2035, which would require average per annum growth of 4.73% from 2021 - 2035.
2: The CPI growth target for 2025 has been reduced to 2%, from around 3% previously.
In stark contrast to other major economies, China has continued to struggle with weak inflation in the wake of the Covid pandemic, largely due to anemic domestic demand induced by the housing slump.
Monthly YoY growth in CPI has hovered at around 0% since 2023.
3: “Even more active” fiscal policy makes its debut for the first time in Chinese history.
State-owned media notes that “government debt is playing an increasingly important role in China’s economic growth.”
In 2025, this will be embodied in several key ways:
The deficit ratio will breach 3% to hit a new high of around 4%, for a one percentage point rise compared to 2024. In 1999 China took its cue from the EU’s Maastricht Treaty, setting 3% as the core benchmark for a healthy fiscal deficit.
The deficit itself will increase by 1.6 trillion yuan compared to 2024 to reach 5.66 trillion yuan.
Total new government debt will rise by a record 2.9 trillion yuan to hit 11.86 trillion yuan.
Total new government debt will be roughly equal to 9% of 2024 GDP - and potentially 10.3% if the two trillion yuan debt quota to roll over hidden local government debt is included.
By contrast, the mammoth four trillion yuan GFC rescue package launched in 2009 was equal to 12% of China's 2008 GDP, and was spread over a two year period.
4: China will issue 1.3 trillion yuan in ultra-long special treasuries outside of the official deficit.
Special treasuries are not included in the deficit, on the grounds that they are used for investment in “profitable areas” which generate cash flow or have assets as collateral.
Last year saw the issuance of 1 trillion yuan in ultra-long-term special treasuries - 700 billion of which were used for national strategies or security development, and 300 billion to subsidise capital equipment upgrades and cash-for-clunkers consumption.
This year will see the issuance of 1.3 trillion yuan in ultra-long special treasuries, including a further 300 billion yuan to support growth in domestic consumption.
5: China will issue a further 500 billion yuan in special treasuries to beef up the capital of the big state-owned banks.
The banks reportedly need the capital injections due to ongoing contraction of net interest margins and easing profit growth, as Beijing calls upon them to “transfer profits” to the real economy.
6: The Chinese central bank will cut the reserve ratio and official interest rates when required.
Looser monetary policy is intended to support increased credit provision to China’s private economy, as well as the country’s broader macroeconomic stimulus campaign.
At the end of last year, China’s Central Economic Work Conference made reference to the need for “moderately loose monetary policy” for the first time in 14 years, in what was interpreted as a pivotal shift in settings.
7: The Chinese central bank will also continue its use of structured monetary policy tools.
The purpose of this is the discretionary channelling of credit to parts of the economy deemed in need of it.
This will include efforts to support the Chinese stock market, as Beijing seeks to keep capital markets healthy so they can support AI and other emerging technologies.
The Chinese central bank will also “optimise and innovate” these tools.
8: China will seek to stabilise its ailing property market by pushing for local governments to buy up housing.
The Government Work Report calls for “driving the acquisition of existing commercial homes,” and “giving municipal governments greater discretion when it comes to acquisition entities, prices and methods.”
Local governments are set to use special purpose bond issues to fund these acquisitions, with Guangdong province already issuing 30.4 billion yuan of the instruments to purchase land across multiple cities.
China’s housing market has been in the grip of a slump since 2021, placing a heavy drag on domestic consumption and investment.