China is considering allowing a wider budget deficit in 2023, and the government is preparing new stimulus measures to meet economic growth targets. This was revealed by a person familiar with the matter.
Policy authorities are discussing the possibility of issuing at least an additional 1 trillion yuan (approximately 20.42 trillion yen) in national bonds for infrastructure development such as water projects. The person spoke on condition of anonymity because the information is private.
As a result of the increased government debt issuance, this year’s budget deficit is likely to significantly exceed the cap of 3% of gross domestic product (GDP) set in March, one of the people said. Such a policy could be announced as early as this month, but talks are still ongoing and the government’s plans could change, another person said.
Broad Budget Deficit
China’s fiscal gap much bigger when special bond sales are included
Sources: China’s Ministry of Finance reports
The debate over additional stimulus underscores growing concerns among top leaders about the state of the economy at home and how it compares with the U.S. economy.
The government has so far avoided broader fiscal stimulus, even as the deepening real estate crisis and mounting deflationary pressures threaten to meet this year’s growth target of around 5%. . If a large-scale stimulus package is actually launched, it would mean that the government has changed its stance.
To manage fiscal risks, China has sought to keep its budget deficit, excluding special government bonds and borrowings from local government financing entities, below the equivalent of 3% of GDP.
Economists See China’s Growth Weakening Further This Year
Outlook for 2023 darkens but 2024 holds firm amid recent signs of stabilizing
Source: Bloomberg survey
However, as fiscal constraints have become greater as economic growth has slowed, calls from government-affiliated think tanks and economists from global companies to ease the cap on fiscal deficits have grown stronger in recent years.
The plan, led by the Ministry of Finance and the National Development and Reform Commission, requires final approval by the State Council and the National People’s Congress, officials said. The Ministry of Finance and the Development and Reform Commission did not immediately respond to faxed requests for comment.
China’s real estate crisis worsens
Source: Bloomberg
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Original title:China Mulls New Stimulus, Higher Deficit to Meet Growth Goal (1) (excerpt)
(Updates by adding the 4th paragraph onwards)
2023-10-10 08:23:53
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