In an article in the People's Daily , the mouthpiece of the Chinese Communist Party, on February 21, Finance Minister Lan Foan pledged that his ministry would "focus on enhancing technological innovation capabilities, increase central government funding for science and technology, and fully support breakthroughs in key core technologies" this year.

"We will support high-quality development initiatives for key manufacturing industry chains, strengthen support for advanced technology transformation in the manufacturing sector, and continue to implement incentive policies for specialized and innovative small and medium-sized enterprises," he wrote.

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China will prioritize financial support for technological breakthroughs this year. Photo: Shutterstock

He also pledged to increase fiscal spending this year, with higher deficits and increased bond issuance, as well as more targeted spending with a focus on improving people's livelihoods and boosting consumption.

The need for stronger fiscal support and new growth drivers has become more urgent for China, amid a struggling property market and a trade war with the United States that is expected to intensify during President Donald Trump's second term.

Specific figures on the deficit ratio and bond issuance scale are expected to be announced at the annual meeting of the Two Sessions next month.

“The market has largely reached consensus on the deficit ratio, with forecasts gradually converging towards 4%,” said Ding Shuang, chief economist at Standard Chartered.

China has traditionally maintained an official fiscal deficit ceiling of around 3%, with some exceptions. For example, the deficit ratio rose to 3.6% in 2020, when the Covid-19 pandemic hit, and rose to 3.8% in 2023 after issuing 1 trillion yuan in special government bonds for disaster relief and reconstruction.

Promoting infrastructure projects will still be important from a fiscal perspective, Ding said. “This year marks the final year of the 14th Five-Year Plan, which requires upgrading and completing infrastructure projects,” he added.

(According to SCMP)