China Shuns Bold Stimulus in Move From Trump-Induced Crisis Mode

Core Viewpoint - China is modestly reducing fiscal stimulus this year while maintaining the ability to provide further support due to geopolitical uncertainties and domestic economic challenges [1][2]. Group 1: Fiscal Policy Adjustments - The broad budget deficit is projected to decline to approximately 9.5% of GDP this year, down from 9.9% in the 2025 plan [2]. - The government has lowered its GDP growth target for this year to 4.5%-5%, marking the lowest target since 1991 [2]. - The official fiscal shortfall will remain at a record-high 4% of GDP for the second consecutive year, having exceeded 3% five times since 2020 [4]. Group 2: Economic Context and Future Outlook - Officials are balancing the need for growth support with the necessity to manage debt risks, with resilient exports and a tariff truce with the US providing some leeway [2][3]. - There is a need to retain room for additional easing later in the year due to potential disruptions from the widening military conflict in the Middle East [3]. - The government debt-to-GDP ratio remains relatively low, and the central bank is still in a position to cut rates and provide more liquidity if necessary [7].