Chinese government allocated $16 billion to fight coronavirus outbreak

Pressure on the government’s fiscal position to ease as the economy recovers, says finance ministry

BEIJING: China will step up funding support for local government bodies to ensure smooth operations as a coronavirus outbreak takes a toll of their revenues, Vice Finance Minister Xu Hongcai said on Thursday.

The finance ministry is accelerating transfers, particularly in regions hit hard by the virus, to guarantee normal operations of local government and ensure salary payments, Xu told a news conference.

The ministry will meet the funding needs of the central province of Hubei, the epicentre of the outbreak, as its revenue has shrunk, Xu said, with only “sporadic” income in February.



“Some other areas with more severe epidemic situation also suffer from periodical falls in revenue. In order to prevent problems, we must take precautions,” Xu added.

But he expected the pressure on the government’s fiscal position to ease as the economy recovers.

Chinese governments at all levels have allocated funds of 110.48 billion yuan ($16 billion) to fight the coronavirus outbreak by Wednesday, including 71.43 billion yuan that has been used, Xu said.

From March the finance ministry has started to provide weekly funding support to Hubei, with 35 billion yuan allocated in the first week, he said.

China’s huge tax cuts aimed at stimulating a slowing economy have already hurt the revenues of debt-ridden provincial governments, with poor western regions suffering the most from squeezed budgets, a Reuters analysis showed.

Asked whether China will raise its budget deficit ratio this year, Xu responded that the government would have to consider various factors, such as economic performance and fiscal revenue and expenditures.

Policy insiders have said increased government spending could push up the annual budget deficit relative ratio to 3% this year, from 2.8% in 2019. Some Chinese economists have called for the deficit ratio to rise to slightly more than 3%.



Xu said Beijing would roll out targeted and phased measures to help virus-hit sectors, but did not elaborate.

China has said it would study phased tax cuts to help small- and medium-sized firms struggling with the impact of the outbreak.

China has issued an advance quota of 6.1 trillion yuan in transfer payments for local governments in 2020, finance ministry official Hao Lei told the briefing.

Mainland China reported a rise in new virus cases on Thursday, driven by a spike in infections in Wuhan, the provincial capital of Hubei, reversing three straight days of declines.