China may increase budget deficits

Spending will provide support for small businesses

BEIJING:

China can consider further deficit spending by the central and local governments, if needed, to finance support for small businesses, a former finance minister said on Saturday.

To spur consumption, some local governments have issued consumption vouchers, but those steps remain inadequate due to a serious decline in fiscal revenue at all levels, Lou Jiwei told the Caixin Summer Summit in Beijing.

China has unveiled a raft of economic support measures in recent weeks, but analysts say its official 2022 economic growth target of around 5.5% will be hard to achieve.

This year, much of the support for the world’s second-biggest economy has come from fiscal stimulus to counter the impact
from Covid-19.

The cabinet has told local governments to ensure 3.45 trillion yuan ($515 billion) in special bond issuance for infrastructure – part of the 2022 special bond quota of 3.65 trillion yuan – is completed by the end of June.

China will front-load some planned 2023 bond issuance in the fourth quarter of this year, with the new quota likely bigger than 1.46 trillion yuan for 2022, sources have told Reuters.

There is still some room for the central government to disburse funds, said Lou, who is now at a top political advisory body.

Published in The Express Tribune, July 10^th, 2022.

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