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E-mail China.org.cn, February 17, 2025
Phoenix TV:
We notice that the Central Economic Work Conference held at the end of last year proposed increasing the fiscal deficit ratio, which is expected to exceed approximately 3% in 2024. Could you please share how the deficit ratio will be arranged for 2025? What considerations are currently being taken into account? Thank you.
Liao Min:
Thank you for your questions. This issue has garnered significant public attention, as the fiscal deficit ratio remains a key focus. The Central Economic Work Conference has clarified that the fiscal deficit ratio will increase in 2025. I would like to share three key points of consideration.
First, there's the purpose of raising the fiscal deficit ratio. Increasing the deficit ratio will provide more momentum for this year's economic development. With a higher deficit ratio, there will be more fiscal space to expand spending and enhance counter-cyclical adjustments. As the deficit ratio increases, combined with the multiplier effect of fiscal policies, it will inevitably stimulate more bank lending and social capital investment, thereby boosting effective demand. More funds can be allocated to support employment, consumption and technological innovation, promoting economic structural adjustment and advancing high-quality development. This, in turn, fosters sustained and healthy economic and social growth.
Second, we need to consider the conditions for increasing the deficit ratio. We have significant capacity to borrow and increase the deficit. This was mentioned in previous press conferences. From a medium- to long-term perspective, China's economy still holds substantial growth potential. First, the government debt ratio is significantly lower than that of major economies and emerging markets, demonstrating that overall fiscal health is sustainable. Second, our government debt is backed by a substantial amount of high-quality assets, which provide both social and economic benefits. Furthermore, the current real interest rate on Chinese government bonds is noticeably lower than China's actual economic growth rate. As a result, government borrowing remains sustainable.
Third, let's discuss how to determine the deficit ratio. Determining the deficit ratio requires a comprehensive consideration of national development needs, macroeconomic growth potential, macro control, fiscal revenues and expenditures, and the medium- and long-term sustainability of public finances. We've conducted thorough discussions and analysis on this matter. In fact, it's common practice for countries worldwide to raise the deficit ratio in response to cyclical changes in the macroeconomy as a way to strengthen counter-cyclical adjustments.
As for the specific deficit ratio for 2025, we can only officially announce it to the public after completing the required legal procedures. While I can't provide specific data today, I assure you that the objectives, conditions and factors considered in raising the deficit ratio have all been thoroughly examined. Thank you.
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