Multiple provinces optimize fiscal expenditure as finance ministry front-loads new local government bond quotas

Multiple Chinese provincial governments have stressed optimizing fiscal spending, with a focus on improving livelihoods, expanding domestic demand, and nurturing new growth drivers. They have recently released fiscal budgets for 2025, with some provinces disclosing the amount of front-loaded local government debt quotas.

In South China's Guangdong Province, the amount of new local government debt quota front-loaded to the province in 2025 is 321.3 billion yuan ($43.97 billion), including general debt of 17.8 billion yuan and 303.5 billion yuan of special local government bonds. That's approximately 60 percent of the province's incremental bond issuance in 2024.

East China's Jiangsu Province said that the amount of front-loaded new government debt quota for 2025 stands at 154 billion yuan, according to a document published on the local government website.

Given a total of 4.62 trillion yuan worth of new local government bonds in 2024, the combined amount of new local government debt quota front-loaded in 2025 is estimated to reach 2.8 trillion yuan, enabling proactive policies to produce effects early on, reported 21jingji.com on Tuesday.

"Such a sizable increase in front-loaded new local government bonds is an earnest implementation of the annual Central Economic Work Conference held in Beijing in December 2024, which pointed out that the country should adopt a more proactive fiscal policy while urging efforts to vigorously boost consumption," Tian Yun, an economist based in Beijing, told the Global Times on Tuesday.

He said that this situation was within expectations, as the authorities have stressed the intention to ensure fiscal policies produce effects early on, which means that efforts will be stepped up at the start of 2025 rather than at the end of the year.

The sixth session of the 14th National People's Congress Standing Committee passed a decision in October 2023 authorizing the State Council to allocate some of the new local government bond quota in advance, in order to speed up the issuance and use of local government bonds and ensure the funding needs of major projects in key areas.

For local government bonds, including local government special-purpose bonds, up to 60 percent of the existing year's incremental bond issuance can be front-loaded as part of the next year's quota, as per existing regulations.

According to local governments, increased fiscal spending will be used for improving livelihoods, spurring domestic demand, and boosting tech innovation. For example, Southwest China's Sichuan Province plans to arrange 136.25 billion yuan in social security in 2025, accounting for 36.7 percent of the province's general public budget expenditure, while 37.16 billion yuan will be used for education, accounting for 10 percent of its general public budget expenditure, Sichuan Daily reported on Monday.

In order to strengthen growth momentum, some provinces will also use fiscal spending to boost tech innovation and accelerate the building of a modern industrial system. For example, Central China's Hunan Province said that it will support the high-quality development of key industrial chains in the manufacturing sector, and actively nurture and expand emerging and future industries.

"Thanks to a series of measures to resolve local government debt risks and the sustained economic recovery, local governments' fiscal situation will continue to improve in 2025," Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times on Tuesday.

Active fiscal spending to improve livelihoods and develop new quality productive forces will boost local economies and contribute to national industrial and economic transformation and upgrading, Xi said.

The implementation of a more proactive fiscal policy this year will likely include a moderate rise in the fiscal deficit ratio, higher fiscal expenditure, and stepped-up government bond issuance so as to bolster the sustained economic recovery, Cao Heping, an economist at Peking University, told the Global Times on Tuesday.

Meanwhile, coordination among fiscal, monetary, employment, and industrial policies and the country's reform and opening-up measures should be further strengthened so as to jointly boost the recovery of China's economy and inject strong momentum into high-quality development, Cao said.

The IMF recently upgraded China's economic growth forecast for 2025 to 4.6 percent, up 0.1 percentage point from October's projection, according to its World Economic Outlook released on January 17.

China's consumer price index rose faster in January, driven by surging demand for travel, dining, and shopping during the Spring Festival holidays, highlighting the vitality and resilience of the economy, Cao said, noting that China's economic expectations this year will outperform those of last year.