PBOC Officials Say China Can Handle Raising Budget Deficit to 4%

Chinese Stocks Tumble Most in a Month
  • Low levels of government debt can help sustain higher deficits
  • Top Chinese officials meet next month to set economic plans

China is able to increase its budget deficit to 4 percent of gross domestic product as the government seeks to cut corporate taxes, central bank officials wrote in an article on the Economic Daily’s website.

Low levels of government debt, "relatively fast" economic growth and abundant state-owned assets give the country more capacity to sell more bonds, according to an article written by People’s Bank of China officials including Sheng Songcheng, head of the statistics department. China could maintain a debt-to-GDP ratio of up to 70 percent at end-2025 if the deficit were raised to 4 percent, the officials said.

China is looking to fiscal policy to help it grapple with the slowest growth since 1990. The deficit is likely to rise this year from 2.3 percent of GDP in 2015, the official Xinhua News Agency recently reported, citing a statement after a fiscal work conference.

Vice Finance Minister Zhu Guangyao said last year the “red line” of 3 percent for the deficit-to-GDP ratio and 60 percent for the debt-to-GDP ratio should be revisited after lessons learned from the financial crisis.

The article in the official Economic Daily publication comes ahead of a gathering of the nation’s top lawmakers early next month, when the year’s economic plans and targets will be agreed upon and announced.

— With assistance by Zhe Huang

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