MNI: China Should Break 3% Deficit Ceiling: CITIC Securities

     BEIJING (MNI) - China needs to raise the deficit-to-GDP ratio above 3% in

2019 by boosting infrastructure investment, thus prevent further economic

slowdown, Ming Ming, chief analyst at CITIC Securities, wrote in a report.

     Such government-led investment in public facilities needs to increase about

8% next year, or an increment of CNY1.2 trillion, to achieve 7% growth in fixed

asset investment(FAI) and ultimately support nominal GDP growth of about 10%,

Ming said.

     By contrast, the growth rate of infrastructure investment was only 3.7% in

the first 10 months, far below the level of 19% a year ago, Ming said. 

     To support the higher level of investment, local governments may need to

issue CNY350 billion of special bonds and CNY850 billion of normal bonds next

year, raising the deficit ratio to 3.2%, according to Ming.

     The central bank's monetary policy is expected to remain loose next year,

and interest rates may further decline, Ming predicted.

     The government set the deficit ratio this year at 2.6% at the National

People's Congress in March.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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