China’s budget deficit reached a record 5.25 trillion yuan ($733 billion) in the first half of 2025. This is a 45% increase compared to the same period last year, based on data from the Finance Ministry shared on Friday.
The large deficit shows that China is spending heavily to support its economy. Total government spending rose 9% to 18.8 trillion yuan, while total income dropped slightly by 0.6% to 13.5 trillion yuan. Tax revenue fell 1.2%, and income from land sales dropped 6.5%, mainly because of ongoing problems in the real estate sector.
This growing gap between income and spending is the result of China’s front-loaded stimulus efforts. The government is investing more in infrastructure and trying to boost household consumption to fight weak demand at home, deflation, and the impact of U.S. tariffs. These tariffs, put in place by U.S. President Donald Trump, are still about 30 percentage points higher than last year, hurting China’s exports to the U.S.
Despite these issues, China’s economy showed surprising strength. It grew 5.3% in the first half of 2025, beating the government’s full-year growth target of around 5%. This was helped by strong government spending and steady exports to countries outside the U.S.
Top Chinese leaders will meet later this month to discuss how to manage the economy going forward. Their decisions will be influenced by the outcome of upcoming trade talks with the U.S. These talks may also shape whether more government stimulus will be needed in the second half of the year.
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