BEIJING (Reuters) – China will step up its fiscal spending this year to support the slowing economy, despite a lower budget deficit ratio, Finance Minister Liu Kun said on Saturday.
A lower budget deficit ratio is an important measure to maintain fiscal sustainability, which will help reserve more policy room for future risks and challenges, Liu said on the sidelines of the annual parliament meeting.
The budget deficit target for 2022 was set at around 2.8% of gross domestic product (GDP), compared with last year’s target of around 3.2% of GDP.
Liu said an increase in the central government’s fund allocation of 1.267 trillion yuan ($42.25 billion) this year – supported by carryovers from previous years, would imply a higher budget deficit ratio.
“This amount of funds is equivalent to raising the deficit ratio by one percentage point, and the intensity of fiscal expenditure is guaranteed,” he said.
China on Saturday targeted slower economic growth of around 5.5% this year as domestic headwinds, including a downturn in its vast real estate sector and lacklustre consumption, cast a pall on the outlook for the world’s second-largest economy.
Premier Li Keqiang said in the government’s work report that tax cuts and tax rebates will amount to around 2.5 trillion yuan this year.
The central government will boost its transfer payments to local governments to nearly 9.8 trillion yuan this year to help offset any hit on local revenues, the finance ministry said.
The government will step up outlays in infrastructure investment, mainly funded by local government special bonds, under an annual quota of 3.65 trillion yuan.
The finance ministry has already issued 1.46 trillion yuan in its 2022 advance quota for local government special bonds, on top of 1.2 trillion yuan in unspent bond funds from the fourth quarter of 2021 – part of the 2021 quota of 3.65 trillion yuan.
($1 = 6.3188 Chinese yuan renminbi)
(Reporting by Kevin Yao and Stella Qiu; Editing by Kim Coghill)
