MNI: Limited Stimulus Scope In Future China Crisis: Advisor

--Hidden Local Government Debts Limit Crisis Response: Gao Peiyong

     BEIJING (MNI) - Ballooning debt has reduced the scope for China to repeat

the stimulus it launched in the wake of the 2008 financial crisis, and

authorities should keep budgets tight despite a slowing economy and the trade

dispute with the U.S., the deputy head of a leading official think tank said.

     The government's budget deficit should be limited to no more than 3% of

gross domestic product, Gao Peiyong, deputy head of the Chinese Academy of

Social Sciences, told a forum in Beijing Saturday, pointing to financial risks

including hidden local government debt which have grown significantly over the

past decade.

     "When any risk is transmitted to fiscal policy, that's the last line of

defence (for China's economy)," he stressed. "Unless, as a last resort during

very major and significant crisis, we can never let the fiscal deficit to GDP

ratio be higher than 3%."

     The Chinese government sets its fiscal deficit target at 2.6% of its GDP

for this year, down from 3% in 2017.

     --TAX CUTS SHOULD TARGET COMPANIES

     While China's economy is facing "new challenges and problems", it should

stick to supply-side reform and controlling financial risk, Gao said, adding

that "the current period is not the same as before."

     "Compared with other risks, inappropriate policies may be the biggest

risk."

     Gao, a member of the National CPPCC Economic Committee advisory body, also

urged authorities to concentrate planned tax cuts on corporations rather than

individuals.

     "As China's main task is supply-side structural reform, the main goal of

tax reduction should be cutting costs for companies and the real economy," Gao

said.

     Policymakers including Finance Minister Liu Kun say the government plans to

cut CNY1.3 trillion in taxes and fees for companies, up from a target of around

CNY1.1 trillion outlined earlier in the year.

     After the speech, Gao told MNI reducing value-added tax would be a "major

channel" for China's tax cutting campaign.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

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