China is considering raising its budget deficit for 2023 as the government prepares to unleash a new round of stimulus to help the economy meet the government's annual growth target, according to people familiar with the matter.

Policymakers are weighing the issuance of at least 1 trillion yuan ($137 billion) of additional sovereign debt for spending on infrastructure such as water conservancy projects, said the people, asking not be identified discussing a private matter. That could raise this year's budget deficit to well above the 3% cap set in March, one of the people said. An announcement may come as early as this month, another person said, though deliberations are ongoing and the government's plans could change.

The discussions underscore mounting concerns among China's top leadership over the trajectory of the world's second-largest economy and how growth compares to the US. It would also mark a shift in Beijing's stance as the government has so far avoided broader fiscal stimulus despite a deepening property crisis and rising deflationary pressure that have put the growth goal of around 5% for the year at risk.

The country's economic slowdown has weighed on everything from Chinese stocks to commodity prices and the results of multinational companies such as Nike Inc. and LVMH.

China has long been trying to keep its official fiscal deficit — which excludes special bonds or debt borrowed by local government financing vehicles — under 3% of GDP partly to control financial risks. But calls to loosen the limit by state-linked think tanks and economists at global firms have grown louder in recent years as fiscal stress built up in a slowing economy.

The plans, led by the Ministry of Finance and the National Development and Reform Commission, are subject to final approval by the State Council and legislators, the people added. The MOF and the NDRC didn't immediately reply to faxes seeking comments.

The Chinese government has stepped up stimulus in recent months with piecemeal actions. It has lowered key interest rates, freed up more long-term cash into the banking system, added support for housing sales and household consumption, and accelerated the issuance of special local government bonds since August.

While some sectors have shown initial signs of a pickup, the broader economic outlook remains uncertain. Home sales continued falling and the recovery in domestic consumption was slower than expected over this month's critical holiday period, underlining subdued confidence that's holding back households and private businesses from spending.

Economists have repeatedly cut their growth forecasts for this year to 5%, now in line with China's annual goal that was deemed conservative when it was set in March.

A further deceleration in growth would add more depreciation pressure on an already-weak Chinese currency, leading capital to leave the country and exposing the nation's financial markets to potential turmoil. Anemic economic expansion also means fewer new jobs to be created, worsening the unemployment situation and endangering social stability.

Using a large chunk of income from treasury note issuance to fund infrastructure spending — a key way Beijing taps to drive economic growth during down-cycles — has been unusual since Chinese provinces were allowed to sell special bonds for that purpose in 2015.

By raising the budget deficit ceiling, the government can sell more general-purpose bonds to fund infrastructure construction, and reduce the interest payment pressure on local authorities which mainly rely on the more costly special bonds for such funding, some economists have said.