Where are China’s Financial Policies Heading in 2025?

The 2025 Government Work Report (GWR) has garnered significant public attention, with key policy directions focusing on boosting consumption, refining measures for national public holidays and memorial days, and addressing the pressures of cutthroat competition. Additionally, the financial policy section includes several notable highlights.

On a macro level, the fiscal deficit-to-GDP ratio is set to reach a record-high this year, at approximately 4 percent, a one percentage point increase over last year. At the same time, the government deficit is projected at RMB 5.56 trillion, an increase of RMB 1.6 trillion over last year’s budget. This indicates strong government support for financial policies.

The GWR also emphasises improving the standards and foundational institutions for technology finance, green finance, inclusive finance, pension finance, and digital finance. In line with this directive, on 5 March, the State Council issued the Guidelines on Advancing 5 Key areas in the Financial Sector, proposing the establishment of bonds dedicated to technological innovation. The ultimate goal is to ensure significant progress in all five areas of the financial sector by 2027.

Regarding risk prevention, the GWR calls for continued use of financial tools, such as expanding the scope of the relending facility for government-subsidised housing and enhancing the real estate financing coordination mechanisms to stabilise the real estate market. Additionally, local governments must implement a package of measures aimed at defusing debt risks. The government plans to allocate RMB 4.4 trillion in local government special-purpose bonds – an increase of RMB 500 billion over last year. The funds raised from these bonds will primarily be used to settle overdue payments owed by local governments to enterprises, as well as for other projects, reflecting stronger fiscal support.

At a press conference on 6 March, People’s Bank of China (PBoC) governor Pan Gongsheng announced that the PBoC will reduce reserve requirement ratios (RRR) and interest rates. The average RRR is at 6.6 per cent, leaving room for further reductions. Pan also indicated plans to launch a new “sci-tech board” in the bond market, a development worth monitoring.