‘Room for govt to increase spending’
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