‘China’s 2015 budget deficit rate higher than declared’
Beijing: China’s budget deficit this year will be higher than previously declared as the government boosts fiscal spending in a bid to bolster economic growth, the finance minister said today.
Premier Li Keqiang said yesterday in his “work report” to the National People’s Congress (NPC), the country’s Communist-controlled parliament, that the deficit would amount to 2.3 per cent of gross domestic product, up from 2.1 per cent in 2014.
But Lou Jiwei said today that a further 200 billion yuan (USD 31.9 billion) of planned spending was excluded from the original calculation for technical reasons, and incorporating it brought the deficit to around 2.7 per cent of GDP, or 1.64 trillion yuan.
That ratio is higher than that of the US, where the Congressional Budget Office, the independent agency that provides economic and budgetary analysis to the legislature
projected in January that the fiscal 2015 deficit would reach 2.6 per cent of gross domestic product.
The actual US deficit is far larger, as its economy remains around double the size of China’s.
Japan’s budget deficit for the current fiscal year, which ends this month, is expected to be 5.2 percent of GDP.
A 2.7 per cent deficit would be China’s largest since the 2.8 per cent recorded in 2009, when Beijing implemented a four-trillion-yuan stimulus to ward off impact of the global financial crisis, according to data earlier provided by Chinese financial outlet Caixin.
“We have to take a moderately expansionary fiscal policy to cushion downward pressures (on the economy),” Lou told reporters at a press conference on the sidelines of this year’s NPC session.
The 2.7-per cent ratio “will play a significant role in support economic development and fend off the downward pressures”, he said.
The world’s second-largest economy grew by 7.4 per cent in 2014, the slowest pace in 24 years, amid headwinds including manufacturing weakness, falling property prices and high corporate and local government debt burdens.
Local government debt, often borrowed from state-owned banks through opaque financing vehicles controlled by authorities, is regarded by economists as a rising risk to China’s financial stability.