In 2025, China’s new government debt will total RMB 11.86 trillion ($1.63 trillion), an increase of RMB 2.9 trillion from last year. Chinese premier Li Qiang  characterised this increase as a “notably higher level of spending.” 

The deficit-to-GDP (gross domestic product) target has risen to 4%, from 3% in 2024, exceeding even pandemic-era levels, signaling a strong willingness to leverage fiscal strength to bolster economic momentum. 

As part of this fiscal expansion, China will issue a record RMB 1.3 trillion ($179 billion) in ultra-long-term special treasury bonds, a RMB 300 billion ($41.3 billion) increase from the previous year. Additionally, RMB 4.4 trillion ($606 billion) in local government special bonds will be issued, another record high. This enhanced fiscal stance is designed to inject liquidity, lower financing costs and accelerate economic activity to counter uncertainties in the global and domestic landscape. It also reflects the government’s commitment to boosting investment, upgrading industrial capacity and stimulating domestic consumption.

Ultra-long-term special treasury bonds stand out as a pivotal component in China’s fiscal policy toolbox. This unique fiscal tool operates outside the regular budget, allowing the Chinese government to fund transformative national projects without impacting the official deficit. These bonds are issued specifically to address funding for strategic, long-term initiatives tied to China's modernisation. Unlike previous special treasury bond issuances, which were used in response to crises, such as recapitalising banks after the 1997 Asian financial crisis or supporting the economy during the 2020 pandemic downturn, this round of ultra-long bonds is forward-looking. The bonds were  designed to proactively build China’s technological capabilities, infrastructure resilience, and food and energy security. These bonds, with maturities of 20, 30, and even 50 years, provide financing for initiatives that will drive China’s technological self-sufficiency, green energy transition and infrastructure modernisation. They target key national strategies, including science and technology innovation, integrated urban-rural development, coordinated regional development and high-quality population growth. Ultra-long-term special treasury bonds play a key role in China’s efforts to remain competitive in the global economy for decades to come. 

This year’s ultra-long bond issuance will cover a broader range of strategic areas. Of the RMB 1.3 trillion ($179 billion)  in ultra-long-term special treasury bonds, RMB 300 billion ($41.3 billion) will directly support consumer goods trade-in programmes, a sum twice the amount allocated last year. This RMB 300 billion ($41.3 billion)  will be aimed at encouraging households to trade-in and spend on new-energy vehicles, home appliances and digital devices. The remaining RMB 1 trillion ($137.7 billion) will target critical national strategies and industrial upgrades. 

Additionally, RMB 500 billion ($68.8 billion) of special treasury bonds have been allocated to recapitalise state-owned banks, ensuring greater liquidity and lending capacity. A more robust financial system will provide greater credit access for businesses and households, further reinforcing economic activity.

China’s more proactive fiscal policy will have impacts that extend beyond the country’s borders. As the largest contributor to global GDP growth, China’s economic performance has direct consequences for international markets, trade partners and investors. Increased domestic consumption and investment will drive higher imports of raw materials, high-tech components and consumer goods, benefiting commodity-exporting nations, industrial economies and multinational brands. The expansion of railways, highways and energy grids means higher demand for steel, copper, lithium and advanced manufacturing equipment, offering a boost to global suppliers. 

Some observers question whether China’s fiscal expansion is sustainable. China’s central government debt remains relatively moderate, with ample room to borrow without destabilising the financial system. Additionally, China’s debt is largely domestically held, reducing exposure to foreign currency risks and speculative capital flight. Moreover, these bonds fund projects with long-term economic returns, ensuring today’s investments lay the foundation for future growth.

Observers also point to China’s local government debt as a cause for concern, noting that when added to central government debt, the total debt burden appears high. However, Beijing has demonstrated an ability to manage these liabilities through debt restructuring programmes that have transferred high-risk obligations to more sustainable financing mechanisms. The central government’s expanded fiscal role, including increased transfer payments to local governments, reduces the reliance on borrowing at the local level. Moreover, recent policy shifts allowing local governments to use special purpose bonds for debt repayment rather than just new projects signal a more sustainable debt path. Unlike highly leveraged economies elsewhere, China’s debt is linked to productive assets, such as transportation networks, industrial parks and technology hubs, which drive future economic output.

China deploys fiscal tools in a coordinated, forward-looking manner

The central government has both the financial flexibility and strategic discipline to implement economic interventions when needed. The shift for the first time in 14 years from a "prudent monetary policy" to an "appropriately accommodative monetary policy" enables fiscal stimulus to be complemented by monetary easing and liquidity support. Moreover, China’s 2025 fiscal plan places a strong emphasis on speed and efficiency, ensuring swift allocation and deployment of funds. Policymakers are taking a "strike fast and strike hard" approach to maximise the economic impact, leaving little room for uncertainty.

At a time of rising volatility and geopolitical tensions, China’s proactive fiscal approach offers a stabilising force, providing resilience and opportunity. By channeling resources into long-term investments, strengthening financial stability and driving domestic demand, China reinforces its role as a key engine of global growth. While challenges remain, its capacity to implement decisive, forward-looking policies underscores its position as a vital anchor in an unpredictable economic landscape. 

Michael Wang  is an anchor of CGTN's BizTalk programme.