China confidence.
China confidence.

China’s deficit-to-GDP ratio target this year is proactive and realistic, China’s finance minister said Thursday.

The appropriate increase of the deficit-to-GDP ratio is an important decision of the Communist Party of China Central Committee and the State Council in line with economic and social development needs and sustainable fiscal development, Liu Kun, Minister of Finance, told a press conference on the sidelines of the annual legislative session. The move will enhance counter-cyclical adjustment to facilitate steady and rapid economic development.

It will also accommodate to tax and fee cuts in a larger scale, effectively lower the burden on enterprises and energize market entities, Liu said. China has lifted its fiscal deficit target to 2.8 percent of GDP for 2019, up by 0.2 percentage points compared with 2018.

Profits turned in by designated state-owned financial institutions and enterprises directly under the central government will be increased and local governments are asked to put various funds and assets to good use through multiple avenues, expanding fiscal resources and allowing only a moderate deficit-to-GDP ratio increase, according to Liu. The 2.6-percent target is lower than the international 3-percent deficit warning line and those of the world’s major economies.

The goal has factored in balance of fiscal revenue and spending and issuance of special-purpose debts and leaves room for macro regulation, Liu said. Unlike many other countries, China’s government debts are used mainly for effective investment instead of maintaining government operation and employee payment, Liu pointed out. China will maintain sustainable fiscal development while enhancing tax and fee cuts and increasing spending on key areas, Liu added.

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