MNI BRIEF: China Should Set 2024 Deficit Above 3.4% - Advisor

China should target a budget deficit-to-GDP ratio above 3.4% in 2024, with central government moderately raising leverage to help ease local fiscal pressures, one of the experts who spoke to Premier Li Qiang in an economic symposium earlier in July said at the CCXI China Credit Outlook Conference on Tuesday

It is acceptable to set the deficit rate above 3.4% or even up to 3.8% instead of seeing 3% as a hard constraint, said Yuan Haixia, executive director of the research institute of China Chengxin Credit Rating Group.

More spending responsibility for education and healthcare should be shifted to the central government from local authorities, said Yuan. She suggested that the proportion of state-owned enterprises profits going to local governments can be increased from the current average of 20%. Local governments control over CNY200 trillion of SOE assets, she noted.

China can consider raising quotas of special refinancing bonds to swap out more off-balance-sheet debts raised by local government financing vehicles, said Yuan, noting that there is still room within the statutory local debt limit. So far, CNY1.35 trillion out of CNY1.5 trillion of such bonds granted this year were issued. (See MNI: China To Advance Local Special Bonds To Boost Economy)