‘Room for govt to in­crease spend­ing’

New Straits Times - - Business World -

China still has some flex­i­bil­ity to ad­just the bud­get deficit ra­tio, said Fi­nance Minister Xiao Jie, sig­nalling the gov­ern­ment would in­crease gov­ern­ment spend­ing in line with the grow­ing econ­omy while pay­ing off debt.

Whether to ex­pand the bud­get deficit ra­tio would de­pend on the abil­ity to re­pay the new debt, said Xiao yes­ter­day on the side- lines of the an­nual leg- isla­tive ses­sions of the Na­tional Peo­ple’s Congress.

“A grow­ing Chi­nese econ­omy and fis­cal in­come are fun­da­men­tal sup­ports to re­pay debts.”

The cen­tral gov­ern­ment must de­cide whether to take on ad­di­tional debt to sup­port in­vest­ment in the com­ing years as the world’s sec­ond-largest econ­omy faces fi­nan­cial risks at home and the prospect of trade con­flicts amid global pro­tec­tion­ism.

It also means the gov­ern­ment could face greater risks from soar­ing debt.

To­tal out­stand­ing credit at the end of last year was equal to 258 per cent of eco­nomic out­put, up from 161 per cent in 2008, ac­cord­ing to Bloomberg In­tel­li­gence es­ti­mates.

The debt bur­den was un­evenly dis­trib­uted. While the cen­tral gov­ern­ment has a rel­a­tively low debt ra­tio, the cor­po­rate sec­tor and lo­cal gov­ern­ments were more in­debted.

China was also study­ing an in­di­vid­ual in­come tax re­form plan. Some house­hold spend­ing items may be ex­empted from in­di­vid­ual in­come tax.

Lo­cal gov­ern­ments would con­tinue to sell gen­eral and spe­cial bonds this year.

China would give tax breaks of 35 bil­lion yuan (RM22 bil­lion) to en­ter­prises this year, he added.

Xiao made the re­marks at his first pub­lic ap­pear­ance af­ter suc­ceed­ing the re­form-minded Lou Ji­wei as fi­nance minister in Novem­ber.

Fi­nance Minister Xiao Jie

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