(Bloomberg) — Chinese leaders plan to set an annual growth goal of about 5% for next year, and raise the budget deficit to 4% of gross domestic product, Reuters reported citing two people it didn’t identify.
Most Read from Bloomberg
The report comes days after top leaders including President Xi Jinping wrapped a yearly economic conference in Beijing, where they were expected to set goals for 2025. Specific targets will only be officially announced at a parliamentary huddle in March, if the leadership sticks to precedent.
The new growth goal would match this year’s target, which officials are on track to hit after unleashing a slew of stimulus since September including rate cuts and more cash for banks. Both targets are in line with economists’ expectations, after policymakers stepped up pledges to increase government spending and economic policy support.
Markets shrugged off the news, with the yuan little changed at around 7.29 in both onshore and overseas trading. The yield on 10-year bonds hovered near a record low, while China’s CSI 300 equity benchmark moved in a narrow range, largely maintaining the small gain it had notched before the lunch break.
Policymakers last week pledged to “maintain stable economic growth” and prioritize boosting domestic consumption and investment at the economic work conference. Days earlier, the 24-man Politburo vowed to adopt a “moderately loose” monetary policy — the first shift in stance in about 14 years. Vows for “more proactive” fiscal tools stoked expectations for a budget expansion.
That shift came as the world’s No. 2 economy braces for a possible trade war with the US when Donald Trump takes office in January. Higher American tariffs on Chinese goods would reduce exports’ ability to power growth, after they contributed to nearly a quarter of economic expansion so far this year.
A 4% headline budget deficit would mark a break with Chinese policymakers’ tradition of capping it at 3%, and indicate a bolder mindset when it comes to fiscal stimulus. But the expansion of 1 percentage point from this year will likely be too modest to fill a widening gap in domestic demand and reverse persisting deflation.
Top officials last week also promised to issue more special treasury bonds and local government special bonds to spur growth. The two types of notes have been an important source of infrastructure investment, and are increasingly being used in other areas such as consumption subsidy.