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Thursday, February 18, 2016, 18:06

Raising budget deficit ratio a necessity: China

By Xinhua

Raising budget deficit ratio a necessity: China
Chinese Finance Minister Lou Jiwei (left) talks with vice Finance Minister Liu Kun at a press conference during the session of the National People's Congress in Beijing on March 5, 2015. (AFP PHOTO / WANG ZHAO)

BEIJING - Raising the budget deficit ratio and cutting taxes are necessary to combat downward economic pressure, according to China's vice finance minister.

The government must expand its spending and lower investment and operation costs for businesses to boost growth, Vice-Finance Minister Liu Kun was quoted as saying in "China Economic and Financial News" on Thursday.

China will gradually raise its fiscal deficit ratio, increase government debt issues and set a limit on new local government debt, according to Liu.

China raised its fiscal-deficit-to-GDP ratio to 2.3 percent for 2015, compared with 2014's target of 2.1 percent, with the number expected to rise to 3 percent or more in 2016.

A 3-percent deficit ratio is normally considered a red line not to be crossed, but a higher ratio enables the government to cut taxes, encouraging production.

In November,

China's Vice-Finance Minister Zhu Guangyao said that it is worth discussing whether the fiscal deficit ratio should be fixed below the ceiling of 3 percent, indicating the possibility of a more proactive fiscal policy in 2016.

Zhu made the remarks on the same day that Premier Li Keqiang, while briefing about 250 political advisers on the draft 13th Five-Year Plan (2016-20), called for bigger efforts in achieving the annual growth target over the next five years. Li said the government is considering more counter-cyclical adjustment policies to help businesses overcome economic difficulties.

"We didn't relax the fiscal policy this year ... the deficit ratio is not at a high level at the moment," Li said at the meeting.

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