China's financial salvo gains speed to shore up economic growth

China's stepped-up fiscal policies are emerging as a pillar in its efforts to stabilise the economy, offering much-needed support to sectors under financial strain and helping the world's second-largest economy weather persistent global uncertainty.

In 2025, the country pledged to intensify counter-cyclical adjustments, raising the deficit-to-GDP ratio to 4% and setting the government deficit at 5.66 trillion yuan (about 786 billion US dollars), both at their highest levels in recent years.

While vowing a more proactive fiscal policy, China plans to issue 1.3 trillion yuan in ultra-long special treasury bonds, up from 1 trillion yuan in 2024, alongside 4.4 trillion yuan in local government special-purpose bonds.

Data points to an accelerated roll-out of bond issuance. In the first quarter alone, the total issuance of government treasury bonds surpassed 3.3 trillion yuan, while local government bond issuance exceeded 2.8 trillion yuan, an over 80% increase from the same period last year.

These funds are swiftly being channelled into efforts to boost consumer demand, accelerate infrastructure investment, and subsidise people in difficulties. Economists said this front-loaded fiscal drive reinforces short-term stability and leaves ample leeway for further issuance of ultra-long treasury bonds and capital support measures for banks later in the year.

STIMULATING DOMESTIC DEMAND

In Guiyang, capital city of southwest China's Guizhou Province, an electric bicycle shop draws a steady stream of customers. The surge in foot traffic, according to store owner Zhou Houlu, is largely thanks to a government-backed trade-in program that offers subsidies to buyers who hand in their used bikes.

"On top of the government subsidies, customers can get discounts depending on the condition of the old bikes," Zhou explained. Since the program's launch, his store's sales have jumped by roughly 15% year on year.

Across China, tens of millions of consumers are tapping into this multi-billion-dollar trade-in program, as the government places renewed emphasis on consumer spending and domestic demand.

To support the program, the government funding for the national consumer goods trade-in program has doubled, from 150 billion yuan in 2024 to 300 billion yuan this year, delivered through ultra-long special treasury bonds.

So far, the efforts have been translating into robust domestic demand. As of April 25, more than 120 million consumers had received subsidies under the program, driving sales exceeding 720 billion yuan. Retail sales of consumer goods, a key barometer of economic strength, rose 4.6% year on year in January-March, with the figure in March recording the strongest single-month growth since 2024.

With 300 billion yuan in ultra-long treasury bonds providing a solid financial backbone, combined with supportive opening-up policies, the 2025 trade-in program is poised to anchor the sustained recovery of China's consumer market, said Peng Yu, chief operating officer at Beijing Zitan Dongjian Data.

Stimulating Domestic Demand

Ramped-up financial support has also been directed toward local governments, enabling them to advance major infrastructure projects vital for sustaining investment momentum.

The construction of a major transport hub in Zhanjiang, a coastal city in south China's Guangdong Province, is progressing at full speed. The project is a key component of the Guangzhou-Zhanjiang High-Speed Railway, which is set to become the province's longest rail line and a key connector within the Guangdong-Hong Kong-Macao Greater Bay Area.

"In the first quarter, our project received 1.497 billion yuan in local government special-purpose bonds, which has been instrumental in keeping construction on track," said the project manager.

This project exemplifies China's expedited drive to direct local bond financing into effective investment. In the first three months of the year, the country's local governments issued new bonds worth nearly 1.24 trillion yuan, including some 960.3 billion yuan in special-purpose bonds.

Aside from more expansionary fiscal spending, local governments have been granted more flexibility in channelling their special-purpose bonds toward project categories, an effort to enhance investment efficiency and regional responsiveness.

Results suggest that the policy shift has gained traction. Fixed-asset investment went up 4.2% year on year in the first quarter, 1 percentage point higher than the full-year growth rate of 2024. Infrastructure investment jumped 5.8% year on year in the January-March period, up 1.4 percentage points from last year.

Analysts expect bond issuance to accelerate further in the second quarter, with the scale of new special-purpose bonds likely to expand.

Feng Lin, senior analyst at Dongfang Jincheng, said the bond supply may exceed expectations in the second quarter, as the government looks to offset external challenges through fiscal expansion. "The faster pace of issuance enhances counter-cyclical adjustment and creates space for future policy manoeuvring," Feng noted.