China’s Social Spending Hits Highest Level in Nearly Two Decades

hp4pe5nf4to8sg9b}(byffc[_media_dl_1.png Bloomberg calculations based on

Article content

(Bloomberg) — China’s government spending has pivoted toward social welfare to a degree unseen for at least a generation, as it runs a record budget deficit with a focus on boosting consumption to cushion the blow from Donald Trump’s tariffs.

Article content

The latest evidence arrived on Monday, when China announced it will start offering nationwide cash handouts to families as an incentive for couples to have children. While Beijing is channeling less on-budget investment into infrastructure, expenditure that covers outlays ranging from education to employment and social security climbed to nearly 5.7 trillion yuan ($795 billion) in the first half  — the highest for the period since the data series began in 2007. 

Article content

Article content

Article content

That represents an increase of 6.4% from a year earlier, according to Bloomberg calculations based on figures published by the Ministry of Finance. Authorities could renew their pledge to prioritize support for domestic demand, as top officials prepare to meet this month to set the economic agenda for the rest of the year while trade talks with Washington continue.

Article content

Article content

The splurge was almost double the increase in total spending under the general public budget, the first and biggest account among the government’s four fiscal books. Infrastructure-related expenditure in the account — allocated for costs such as environmental protection, irrigation facilities and transportation — was 4.5% less than a year earlier.

Article content

Fiscal priorities have shifted after the trade war unleashed by Trump threatened China with millions of job losses and put pressure on its patchy social safety net. Under the new policy of childcare subsidies, the government will spend 3,600 yuan a year per kid under the age of three, according to the official Xinhua News Agency.

Article content

Citigroup Inc. estimates a total lump-sum payout of 117 billion yuan in the second half of 2025, while Morgan Stanley puts the program’s annual cost at 100 billion yuan, assuming about 9 million births a year.

Article content

Article content

Although President Xi Jinping has in the past resisted large-scale handouts to families over what he’s called “welfarism,” China responded in recent months by ramping up government support for households. The goal is partly to bolster domestic demand in the face of US tariffs, which have sent the country’s shipments to the world’s biggest consumer market slumping this year. 

Article content

“Better supporting people’s well-being will help boost domestic demand and is part of the rebalancing of the Chinese economy,” said Tommy Xie, head of Asia macro research at Oversea-Chinese Banking Corp.

Article content

At the same time, China launched construction of a 1.2 trillion yuan mega-dam in Tibet this month, a massive project that will likely take years to complete.

Article content

“The room for infrastructure expansion in the future will shrink marginally” even though it can play a “supporting role at critical times,” OCBC’s Xie said.

Article content

Social security and employment saw the biggest gain in spending related to people’s well-being, up almost 8% in the first half from a year earlier. A survey carried out by China’s central bank showed an employment sentiment index hit a record low in the second quarter, illustrating the need for more government aid for job seekers.