Chinese economist calls for confidence, says GDP target should remain 5% in 2025

Adviser to China’s central bank says increasing the fiscal deficit ratio, expanding stimulus should put five per cent growth in reach for 2025

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China’s gross domestic product growth, sluggish for parts of 2024, is a major metric of economic health. Photo: AFP

Published: 2:58pm, 2 Dec 2024Updated: 9:12pm, 2 Dec 2024

China should set next year’s target for economic growth at around 5 per cent – the same benchmark as this year – as a show of determination, a prominent central bank adviser has suggested, adding the country should lift the fiscal deficit ratio above 3.8 per cent to create space for more stimulus and guard against increased tariffs under US president-elect Donald Trump.

The recommendations were made by Wang Yiming, former deputy director of the Development Research Centre of the State Council, at the China Macroeconomy Forum in Beijing on Saturday. The forum was held ahead of the coming central economic work conference, an annual meeting that sets the tone for policy in the following year.

“Setting the gross domestic product growth rate at around 5 per cent is essential, as it guides market expectations and expresses our confidence,” Wang said.

Despite the momentum seen in recent economic data releases, comparatively slow periods of GDP growth in 2024 have presented challenges to the world’s second-largest economy in achieving its annual goal of “around 5 per cent”.

As heightened trade tensions seem inevitable, Wang said, a likely contraction in exports, sluggish domestic demand and an ongoing slump in the property market all indicate more supportive fiscal and monetary policy will be needed to reach a similar target next year.

Wang cited research from China Finance 40 Forum – a Chinese think tank which covers economic and financial policy – indicating broad fiscal expenditures should increase by 2.6 trillion yuan (US$359 billion), 2 per cent of nominal GDP. This, however, would necessitate a raising of the government’s deficit ratio.