Exclusive Interview with Li Ping: A Target of 4% to 4.5% Fiscal Deficit Ratio in 2025, and a Scale of Approximately 5.5 Trillion CNY

The Central Economic Work Conference was held from December 11th to 12th in Beijing.

The conference requires that next year we will stick to the strategy of steady growth with proactive measures, innovation, and breakthroughs. We need to strengthen policy tools, improve macro-control, and ensure continuity and effectiveness.

We should implement more proactive fiscal policies. Increase the fiscal deficit ratio to ensure continuous efforts and greater force. Increase government spending intensity and strengthen key area guarantees. Issue long-term special bonds to continuously support the "Two Reforms" and "Two New" policies. Increase local government special bond issuance and usage, expanding investment channels and project capital.

How do you view increasing the fiscal deficit ratio? Next year's fiscal deficit ratio may be in what range? How much will long-term special bonds increase in scale? Which areas will prioritize investments? This interview with Li Ping, Chief Researcher and Head of the Macro-economy Research Institute at the National Bureau of Statistics, explores related topics.

Implementing More Proactive Fiscal Policies

NBD: The conference mentioned implementing more proactive fiscal policies and increasing the fiscal deficit ratio. What are your views on this?

Li Ping: Increasing the fiscal deficit ratio is a specific measure to implement more proactive fiscal policies. Fiscal deficits are an important way for governments to regulate economies, and by expanding the fiscal deficit ratio, we can increase financial resources to support real economies and drive steady growth.

In retrospect, China's fiscal deficit ratio has long been maintained at a relatively low level. However, compared with developed countries, this proportion appears more conservative. In economic downturns, developed countries' fiscal deficits often increase significantly, sometimes reaching levels of 8% or higher.

The conference proposes increasing the fiscal deficit ratio, and I believe that next year's total deficit may be around 5.5 trillion CNY. Although this number is an increase compared to the past, considering China's government debt and overall financial situation are stable and healthy, especially with a low central government debt-to-GDP ratio, this increase will not pose significant risks.

Data shows that by the end of 2023, the average government debt rate for G20 countries was 118.2%, with Japan at 249.7%, Italy at 134.6%, and the United States at 118.7%. Meanwhile, China's total government debt stood at 85 trillion CNY, with a debt-to-GDP ratio of 67.5%.

NBD: The conference emphasizes implementing more proactive fiscal policies. What is the reason and significance behind this?

Li Ping: China has been implementing proactive fiscal policies for over 15 years, but "more proactive fiscal policies" is a relatively rare phrase. Currently, our economy operates steadily, with stable growth, but the lack of domestic demand persists, and next year's economic performance will face greater external shocks. To effectively stimulate consumption, expand investment, stabilize foreign trade and foreign investment, the central government proposes implementing more proactive fiscal policies in 2025, which means taking larger-scale policy measures to accelerate economic recovery.

China's fiscal deficit ratio has long been maintained at a relatively low levelIncreasing Long-Term Special Bonds

NBD: The conference proposes increasing long-term special bonds. What do you think the scale will be? Which areas will prioritize investments?

Li Ping: This year's government work report proposed issuing long-term special bonds continuously for several years, specifically for national major strategic implementation and key area safety capabilities. By the end of this year, 1 trillion CNY in long-term special bonds has been issued, with clear investment directions. A portion of these funds was used to support national major strategic implementation and key area safety capabilities, while another portion went toward social security and consumer support, particularly in the consumption sector, such as large-scale equipment upgrades and consumer goods replacement.

In 2025, the scale of long-term special bond issuance is expected to increase further, with an estimated amount of around 1 trillion CNY. In terms of investment direction, a portion will continue to support "Two Reforms" and "Two New" policies, ensuring major project investment funds, promoting large-scale equipment upgrades, increasing production efficiency and advanced capacity ratio, and accelerating the cultivation of new types of productivity.

NBD: The conference emphasizes increasing local government special bond issuance. What policy measures can be expected?

Li Ping: I believe that next year's local government special bond issuance will exceed 6 trillion CNY, used to supplement local financial resources and further support key areas such as infrastructure construction, agriculture, water conservancy, energy, logistics, and social security engineering. Currently, some local governments face fiscal pressure and difficulties in settling accounts with enterprises, leading to a significant increase in overdue accounts payable. By issuing special bonds, local governments can obtain more funds and prioritize solving existing debt-related issues, relieving enterprise financial pressures and promoting economic normal operation.

Additionally, the scope of special bond usage may gradually expand, no longer limited to traditional infrastructure construction fields but also used in other areas such as city consumption. Moreover, government funds may be allocated to provide support for specific groups, such as difficult families and university students, offering a certain level of living allowances or employment assistance to alleviate their economic pressures. In cities with high concentrations of universities, future plans may consider providing more employment support and economic aid to graduates, helping them smoothly transition into the workforce, alleviating social employment pressure, and also fostering local economies.

Daily Economic News