For months, China has been committed to helping people spend more money to turn their economy around, but there are few concrete measures.
On Wednesday, the country's top leader pledged to boost spending “heavy” but once again provided limited details and little money to back it up.
The government's budget and annual work report, released on the most important day on China's political calendar during a meeting in Beijing called the National Congress, set an optimistic target for growth of 5%, shows how the economy will get there without a surge in exports this year. China's reliance on growth trade faces new challenges as the US and many other countries are raising tariffs on Chinese products.
“Headwinds remain very resistant to growth. The real estate market is not stable and consumer confidence remains low,” said Tao Wang, chief economist at UBS. “Now we have new tariffs and we know who else is going to happen. The policy needs to do heavy lifting.”
Below is a key takeaway from China's budget and what it means for one of the world's largest economies.
Beijing to consumers: Expenses, Expenses, Expenses!
China is one of the few places in the world with deflation, an economic situation where many prices are falling. It may sound appealing to Americans struggling with large bills due to groceries and other expenses, but it can be a lame issue. Many businesses and households have been shrinking in recent years. DEFL also increases the cost of paying debt and encourages consumers to postpone purchases against expectations of lower prices in the future.
China's leadership confirmed this on Wednesday, setting its consumer inflation target at 2%, the lowest rate in 20 years. To reverse the price decline and achieve that goal, households need to feel richer.
One way is to expand the country's social safety net. Authorities said the minimum basic old age pension will be raised by $2.75 per person per month. They promised child care subsidies and more services for the elderly. There was also mention of wage improvements.
The government wants to seduce people to buy appliances, smartphones and more, go to movies and eat out. Some cities like Shanghai are distributing vouchers for as much as 30% discounts on catering, tourism and sports.
However, Chinese leaders did not announce a national voucher on Wednesday. Instead, they focused on more subsidies for consumers who wanted to trade old cars, appliances, and even rice farmers.
The government has also targeted the creation of jobs in cities of 12 million to maintain about 5.5% of unemployment.
More companies like Deepseek please.
The fierce success of homemade artificial intelligence startup Deepseek casts public pride and awakens the government to the power of the private sector. China's top leader Xi Jinping showed he had paused last month in years of crackdown on the technology sector when he met Jack Ma, the country's most well-known entrepreneur who had been on the sidelines for four years.
On Wednesday, the government said it would prioritize innovation.
The push is part of Xi Qinkai's ambition to make China technically self-sufficient and rival the US.
It is also part of a broader perception that China's tech sector is a key factor in Beijing's willingness to strengthen consumption and create more jobs. A few days after Xi met Ma and the chiefs of other companies, he said it “helps promote common prosperity.”
The Chinese government has little money to travel.
For most of the past 40 years, China's domestic and local governments have been riding the ever-growing stream of tax revenue. This funding helped them pay for a large bulletproof train network, huge industrial subsidies and rapid military accumulation.
It was over at the time. Deflation is beginning to erode the government's ability to gnaw the financial foundations of its government and take on major projects.
The Treasury budget included a series of disclosures showing that last year's tax revenues were significantly weaker than expected. As a result, China's fiscal deficit is growing.
The central government's largest money spinner is the value-added tax, a type of sales tax collected in virtually every transaction in China. According to the budget, revenue from that tax fell unexpectedly by 3.9% last year, almost 8% less than the ministry had planned.
Nevertheless, the ministry predicted revenue from VAT would recover this year, increasing by 3.8%.
Chris Buckley and Amy Chang Chien contributed reports from Taipei.
