Beijing announces ambitious strategy for 2025

China is at a major economic turning point. While the combined effects of sluggish consumption, an increased real estate crisis and high unemployment are hampering its development, Beijing has just announced an ambitious budgetary policy for 2025. The stated objective is clear: to stimulate demand internal and stabilize an economy subject to strong pressures. To achieve these ambitions, the government plans a significant increase in public spending, coupled with a review of its fiscal priorities. These measures, detailed at a national conference, reflect a firm desire to support local communities, expand social benefits and strengthen the resources of companies in difficulty. Such a strategy, structured around innovation and strategic technologies, also aims to revitalize trade with a view to adapting debt rules. With this comprehensive approach, Beijing intends to lay the foundations for more resilient economic growth and respond to the structural challenges that hinder its trajectory.

An increase in the deficit to boost consumption

China has announced a budgetary policy described as “more active” for the year 2025, which constitutes a significant change in its economic management. This decision was presented at the end of a two-day national conference on budgetary work, which concluded this Tuesday, December 24, 2024. According to the Minister of Finance, Lan Fo'An, this new orientation aims to “promote consumption” with a view to strengthening the financial resources of local authorities. In a context of fragile domestic demand, these initiatives aim to restore impetus to an economy seeking stability.

To achieve this objective, the government plans an increase in state bond issues, increased financial support for local authorities and an increase in social benefits. These measures add to previous effortssuch as reducing interest rates and relaxing debt rules. However, these early reforms proved insufficient in the face of major structural challenges, including a lasting crisis in the real estate sector and high youth unemployment. The new budgetary plan therefore aims to overcome these obstacles and pursue a growth objective set at 5% for 2025. This ambition nevertheless remains cautious, because the IMF estimates that growth could peak at 4.5%, which would thus reflect the limits of current economic measures.

An industrial and technological strategy at the heart of the recovery

The new Chinese budget plan, although it accentuates social measures, is part of a broader strategic vision which aims to consolidate the role of industry and technology at the heart of the national economy. Thus, President Xi Jinping stressed the paramount importance of innovation and technological development to strengthen the country's competitiveness. This priority is accompanied by fiscal and monetary easing intended to ease pressure on struggling businesses and stimulate exports, still considered a central pillar of economic growth.

At the same time, this budgetary orientation reflects a clear ambition to reorient the economy towards sectors with high added value. Through the diversification of its growth engines, China is seeking to reduce its dependence on domestic consumption which remains below pre-pandemic levels. However, critical voices are being raised among economists, who warn of the limits of these reforms. According to them, without direct actions to support households and boost demand, the impact of these measures risks remaining partial. Long-term results will therefore depend on Beijing's ability to balance structural investments and immediate support for consumption, and to maintain an ambitious course to fundamentally transform its economy.

Thanks to the consolidation of its budgetary policy, China is showing its determination to overcome a global situation marked by uncertainty. However, this ambition is not without risks. Challenges linked to growing debt and internal economic imbalances could weaken the expected results. On the international stage, this strategy could reposition Beijing as a key economic player, capable of influencing global trade interactions. However, China's ability to translate these intentions into concrete results will depend on the effectiveness of the reforms undertaken and their compatibility with the expectations of markets and households. The success or failure of this economic bet could well redefine the contours of Chinese growth for years to come.