For months, China has promised to help its people spend more to turn the economy around, while taking few concrete measures.
On Wednesday, the country’s top leaders pledged to “vigorously” boost spending but once again offered limited details and little money to back it up.
The government’s budget and annual work report, released on the most important day in China’s political calendar, during the meeting in Beijing called the National People’s Congress, set an optimistic target of 5 percent growth but gave scant indication of how the economy would get there without another surge in exports this year. China’s reliance on trade for growth faces fresh challenges as the United States and many other countries have raised tariffs on Chinese goods.
“The headwinds remain very strong on growth: The property market hasn’t stabilized and consumer confidence remains low,” said Tao Wang, chief China economist at UBS. “Now we have a fresh wave of tariffs and who knows what else will come. Policy needs to do the heavy lifting.”
Here are some key takeaways from China’s budget — and what it means for one of the world’s biggest economies.
Beijing to consumers: Spend, spend, spend!
China is one of the few places in the world with deflation, an economic condition in which many prices are falling. That might sound appealing to Americans struggling with hefty bills for groceries and other expenses, but it can be a crippling problem: Many companies and households have seen their earnings shrink in recent years. Deflation also raises the cost of debt payments and encourages consumers to put off purchases on the expectation of prices being lower in the future.
China’s leadership acknowledged this on Wednesday, when it set its target for consumer inflation at 2 percent, the lowest rate in two decades. To reverse falling prices and achieve that target, it needs to get households to feel richer.
One way is to expand the country’s social safety net. Officials said that they would raise minimum basic old age pensions by $2.75 per person each month, a token amount that experts said was too modest. They promised child care subsidies and more services for the elderly, two major burdens for households, without giving any details. There was also a mention of improving wages.
The government wants to entice people to buy things like home appliances and smartphones, go to the movies and eat out. Some cities, like Shanghai, have handed out vouchers for discounts as high as 30 percent for catering, tourism and sports.
But China’s leaders did not announce nationwide vouchers on Wednesday. Instead, they focused on more subsidies for consumers who want to trade in their old cars, appliances and even rice cookers.
The government also targeted the creation of 12 million urban jobs to keep unemployment around 5.5 percent.
More companies like DeepSeek, please.
The blistering success of the homegrown artificial intelligence start-up DeepSeek has delivered a dose of national pride and awakened the government to the power of its private sector. China’s top leader, Xi Jinping, signaled last month a pause in his yearslong crackdown on the tech sector when he met with Jack Ma, the country’s most prominent entrepreneur who had been sidelined for four years.
On Wednesday, the government said it would prioritize tech innovation.
The push is part of Mr. Xi’s ambition to make China technologically self-sufficient, rivaling the United States.
It also part of a broader realization that China’s tech sector is a critical factor in Beijing’s drive to bolster consumption and create more jobs. Days after Mr. Xi met with Mr. Ma and other corporate chieftains, telling them to “help promote common prosperity,” two of the country’s biggest employers, the delivery companies Meituan and JD.com, announced that they would pay social security benefits to many of their riders.
China’s government has less money to go around.
For most of the past four decades, China’s national and local governments rode an ever-rising tide of tax revenue. The money helped them pay for an extensive bullet train network, enormous industrial subsidies and a rapid military buildup.
Those days are over. Deflation is gnawing at the government’s financial base and beginning to erode its ability to undertake big projects.
The Ministry of Finance’s budget included a series of disclosures showing that tax revenue last year was considerably weaker than expected. The result is that China’s budget deficit is widening.
The biggest money spinner for the national government is the value-added tax, a kind of sales tax that is collected on practically every transaction in China. Revenue from that tax unexpectedly tumbled 3.9 percent last year, almost 8 percent less than the ministry had planned, according to the budget.
The ministry nonetheless predicted that revenue from the value-added tax would recover this year, growing 3.8 percent.
Chris Buckley and Amy Chang Chien contributed reporting from Taipei.