CHENNAI: A 5.6 percent surge in China’s combined public budget and government fund expenditures during the first quarter of 2025 strongly suggests that the country is bracing itself for the growing impact of heightened US tariffs on its exports.
According to data released by the Ministry of Finance on Friday, total government spending reached 9.26 trillion yuan ($1.3 trillion) between January and March—marking the strongest first-quarter increase in three years as suggested by several reports already out on China’s economic outlook.
The reports further note that China has already utilised nearly 22% of its total annual budget within the first three months of the year. Analysts interpret this accelerated spending as part of a broader strategy to fortify the economy against multiple headwinds -- escalating trade tensions with the United States, a prolonged housing market slump, and persistent deflationary pressures that continue to weigh on consumer and business confidence.
Evidence of these measures is reflected in the uptick in public expenditure, despite economic growth remaining tepid in the first quarter of the year. Some analysts point to expedited tax rebate disbursements as a means to ease the financial strain on exporters affected by US tariffs.
Key Measures Implemented by China Include:
Diversification of Export Markets
Confronted with US tariffs now exceeding 145%, Chinese manufacturers are actively exploring alternative markets to compensate for reduced demand from the US. Companies like Zhuoyuan VR Tech have shifted focus to Southeast Asia, Latin America, and the Middle East, which now represent significant growth areas. Likewise, manufacturers in Dongguan are pivoting towards the Middle East to recover lost US business.
Legal and Policy Countermeasures
Under the Anti-Foreign Sanctions Law (AFSL), China has established a robust legal framework to respond to foreign sanctions. In March 2025, new AFSL regulations were enacted, enabling authorities to implement asset freezes and impose restrictions on business operations for entities deemed to be undermining national interests.
Promotion of the Dual Circulation Strategy
China continues to prioritise its “dual circulation” strategy, which aims to reduce reliance on external demand by enhancing domestic consumption and driving innovation. This model focuses on strengthening internal economic resilience while remaining engaged with global trade, helping cushion the economy against external shocks.
Through these comprehensive and multi-layered initiatives, China is actively adapting to a shifting global trade environment, working to safeguard the stability of its export-driven economy amid deepening trade frictions with the US.