$1.8 Trillion: China runs record budget deficit as welfare spending soars

China's government racked up a record budget deficit last year as spending on social welfare grew at the fastest since 2017, marking a shift in fiscal priorities during months of trade tensions with the United States.

Broad expenditure climbed almost 4% from a year earlier, exceeding government revenue by ¥12.7 trillion ($1.8 trillion), according to Bloomberg calculations based on data released by the Ministry of Finance on Friday. Combined outlays that cover areas from education and social security to healthcare rose 9.5% from a year earlier.

The largesse stood out in a year defined more by fiscal restraint, as Beijing tried to balance support for the economy and households with efforts to curb local borrowing risks. The government spent a total of ¥40 trillion last year under its two main budgets about 5% less than envisaged early last year.


The last time China spent more than planned was in 2018, during the first trade war started by US President Donald Trump.

The focus of spending shifted as authorities pledged more support for domestic demand, rolling out measures such as nationwide cash handouts to families as an incentive for couples to have children.

But although overall spending grew at the fastest since 2020, the increase didn't fully go to prop up economic growth.

A large chunk of the money went toward refinancing off-balance-sheet borrowing by local governments.

With exports expected to stay resilient in the months ahead, the government may expand outlays only modestly this year as it struggles to boost revenue while continuing the campaign to defuse concerns about the debt amassed by provinces.

Broad spending grew in the first half of last year as the authorities rushed to prop up domestic demand in anticipation of setbacks to exports from Trump's tariffs.