Support added for equipment upgrades

Chinese policymakers will significantly increase the issuance of ultra-long-term special treasury bonds in 2025 to stimulate consumption and fund key national projects, the country's top economic regulator said on Friday.

Economists said it is part of the country's broader efforts to spur domestic demand amid external uncertainties this year, saying policymakers will adopt "more proactive" fiscal and monetary policies to boost domestic consumption and expand effective investment.

Yuan Da, deputy secretary-general of the National Development and Reform Commission, said the special treasury bonds will be used to promote programs for large-scale equipment renewals and trade-in deals for consumer goods and further support major national strategies while building up security capacity in key areas.

"This year, we will extend the programs and expand the scope to more consumption fields," Yuan said at a news conference on Friday in Beijing.

Yuan added that the scope of equipment upgrades will be extended to fields such as electronic information, workplace safety and protected agriculture, while households will be eligible for subsidies to buy three types of digital products this year, including smartphones, tablet computers and smartwatches.

Betty Wang, lead economist at British think tank Oxford Economics, said consumer trade-in programs played a pivotal role in spurring consumption in recent months.

"Retail sales of items included in the trade-in programs, such as household appliances, furniture, construction and decoration materials and electric vehicles grew by an average of 6.8 percent year-on-year during the September-November period, accounting for a quarter of headline retail sales growth," Wang said.

She added that government measures to extend consumer trade-in programs and expand the scope to more products will "help maintain the current momentum of replacing old home appliances and traditional internal-combustion vehicles with EVs in the coming months."

Meanwhile, Wang said more efforts should also be made to support employment and improve the income outlook, which will substantially boost consumer confidence and sentiment.

As of early December, the country had fully allocated all proceeds from last year's 1 trillion yuan ($137 billion) in ultra-long-term special treasury bonds, with around 70 percent of proceeds funding projects for major national strategies and building up security capacity in key areas, and the remainder going toward large-scale equipment renewals and trade-in deals for consumer goods, said the NDRC.

"This year, we expect net financing from central government special bonds to be raised to 1.5 trillion yuan from 1 trillion yuan in 2024," said Lu Ting, chief China economist at Nomura.

Citing the annual Central Economic Work Conference held in December, Lu said policymakers pledged more specific measures to support consumption, including increasing basic pension payments and raising fiscal subsidies for basic medical insurance.

Lu said his team expects Chinese policymakers to consider an increase in spending on social security for lower-income households.

"We especially expect Beijing to significantly increase payments to those rural pensioners (55 percent of total pensioners) whose average monthly pension income is only 225 yuan. Beijing may also waive part of the annual 400-yuan fee on basic medical insurance for low-income individuals," he said.

Looking forward, Lu said "the probability that China will set the GDP growth for 2025 at 'around 5 percent' is on the rise", as the country seeks to extend the economic momentum following some green shoots witnessed in recent months.

Commenting on the annual economic growth target for 2025, Yuan, from the NDRC, said that the country will balance its needs along with medium-to-long-term plans.

Despite facing challenges and difficulties ahead from a more complicated and grimmer external environment, he said the country still enjoys favorable conditions and positive factors.

"By deepening reforms, fostering new quality productive forces in line with local conditions and smoothing out domestic economic circulation, we can effectively unlock the internal driving forces that will propel economic growth," he said.

Yuan added that the country has ample policy space to bolster economic growth. "We are fully confident of promoting sustained economic recovery this year."

Looking ahead, Zhang Ming, deputy director of the Chinese Academy of Social Sciences' Institute of Finance and Banking, said China's annual GDP growth rate is likely to reach 4.7 to 5 percent if the government takes expansionary moves in macroeconomic policy adjustments.