China’s budget deficit hit a record of $367 billion in the first four months of the year. This is a sudden spike as Beijing stepped up its fiscal stimulus to offset the shocks of the current trade war with the United States. The growing deficit shows the government’s firm determination to shore up the economy at this uncertain moment. Even though the two nations signed a recent ceasefire agreement, Beijing’s increased spending reflects its conservative strategy of addressing external economic pressures.
#China Ran Record Budget Deficit With Spending Blitz Amid Tariffs https://t.co/9GSxULDDUj
— Giovanni Staunovo🛢 (@staunovo) May 20, 2025
The Finance Ministry of China reported that the budget deficit between January and April hit 2.65 trillion yuan ($367 billion). Bloomberg’s estimates indicate that this is the largest recorded deficit for this period. The shortfall ballooned by almost 50% from last year. This escalation clearly reveals China’s rising dependence on fiscal stimulus to prop up the growth under global trade tensions.
Trade War Pressures & Tariff Spike
Prior to the recent trade detente, US tariffs on the lion’s share of Chinese imports reached record 145% in April. This hike put additional pressure on China’s economy. Though some stabilization of government revenues was seen, spending surged sharply.
Aggregate income declined only minimally by 1.3% year-over-year to 9.32 trillion yuan in January-April. Some of the stability in revenues is attributed by analysts to increased collections of individual income taxes, which rose 1.9% in April.
Expenses Soar on Debt Interest
Overall government expenditure increased 7.2% to 11.97 trillion yuan. This figure represents normal budgetary expenses as well as capital investment via the government fund budget. The most rapid growth was in interest payments on government debt, which jumped 11%. Other major expenditures were on education, social security, and labor programs intended to help workers threatened by disruptions in trade.
Spending growth in both the federal and municipal government picked up relative to the first quarter. The trend probably indicates rising investment in infrastructure and in projects supported by government bond issuance. Spending by the central government under the fund budget rose 75%, and the provincial governments raised their spending by 16.6%.
Trade Truce Reduces Need for Further Stimulus
The short-term tariff cut deal between the US and China has moderated near-term fiscal pressures. Some of the big foreign banks now forecast firmer Chinese growth in the year and anticipate fewer government stimulus steps. The latest budget numbers lend support to the belief that Beijing will hold off on more spending until clearer trends from the economy are seen.
China’s record budget deficit illustrates the government’s deliberate application of fiscal policy in coping with trade tensions. But the recent trade truce buys some breathing space, which could cut the necessity of vigorous stimulus in the next few months.
