Increased government spending this year is expected to boost construction of infrastructure and ease financial risks, a priority measure the government will take to stabilize economic growth, according to analysts.
China will raise its fiscal deficit target to 2.76 trillion yuan ($411.8 billion), or 2.8 percent of GDP, this year from 2.6 percent in 2018, according to the annual Government Work Report released on March 5.
The report was delivered by Premier Li Keqiang at the opening of the second session of the 13th National People’s Congress on March 5. The policies listed in the report will be reviewed and discussed by legislators and policy advisers during the session.
Total government spending is budgeted at more than 23 trillion yuan, up by 6.5 percent from last year, the report said.
As a major measure to tackle economic risks, the proactive fiscal policy this year will become stronger and more efficient, Premier Li said.
“That’s a big decision made by the government,” said Sun Ruibiao, deputy head of the State Administration of Taxation and a member of the 13th Chinese People’s Political Consultative Conference National Committee.
It means the government needs to “tighten belts” and control spending at the same time in some general administrative spending, to concentrate money into key areas such as rural development, environmental protection and improving people’s livelihoods, Sun said.
In 2018, the government’s total spending was 22 trillion yuan, up 8.7 percent year-on-year. Total fiscal revenue was 18.33 trillion yuan, representing growth of 6.2 percent from a year earlier, according to the Ministry of Finance.
Besides the government’s budgeted spending, capital will also be raised from off-budget debts, especially through local government special bonds. The report said the annual quota of special bonds would be raised to 2.15 trillion yuan, up by 800 billion yuan from last year.
Zheng Zhijie, president of China Development Bank, disclosed at a group discussion of the CPPCC National Committee on March 5 that he has handed in a proposal to expand the use of capital raised from the pledged supplementary lending, a special financing measure to pump up policy bank lending to back the shantytown renovation program. Experts said that may signal a rebound in the property market, especially in lower-tier cities.
To maintain stable GDP growth, meanwhile, monetary policy will be neither too tight nor too loose, and will require that increases in the money supply and aggregate financing be in line with nominal GDP growth rates, the report said.
“We will refrain from using a deluge of stimulus policies,” Premier Li said at the opening of the session.
More targeted cuts of reserve requirement ratios, or the proportion of cash commercial banks are required to keep as reserves, will be launched this year, especially for small and medium-sized banks, to inject more funds into small private companies, the report said.