MNI Policy: China's Increased Deficit To Counter Slowdown: Liu

--Local Gov'ts Banned From Financing via LGFV: Liu

     BEIJING (MNI) - China's 0.2 percentage-point increase in this year's budget

deficit will counter slowing growth, with the deficit hike largely accounted for

by reduced tax revenues after cuts, Minister of Finance Liu Kun said Thursday . 

     Here are the key points from a press conference during the National

People's Congress on Thursday.

     --China has been able to keep its deficit at the forecast level by cutting

costs and focusing on targeted spending, Liu said. The target deficit ratio for

2019 has been increased to 2.8% of GDP from 2.6% last year, according to Premier

Li Keqiang's Government Work Report.

     --Local governments are forbidden to raise funds illegally via local

government financing vehicles (LGFVs) and add new implicit debts, Liu said. The

finance ministry will monitor local fiscal departments and LGFV, and they will

be held accountable if new debts are found, Liu said.

     --The total size of announce tax and fee cuts could exceed the CNY2

trillion target set by the Government Work Report, Liu said. Lowering the VAT

rate is the highlight, and this will prepare for merging the VAT rates from

three brackets to two, he added.

     --The Ministry plans to support SMEs by increasing government purchases. At

least 30% of the appropriation budget should be given to SMEs' services and

goods, said Liu Wei, deputy Finance Minister.

     --Increased local government special bond issuance this year will be used

mainly to support on-going major projects for poverty alleviation,

anti-pollution, shantytown renovation, railway, highway, water conservancy and

rural revitalization, as well as promote major development strategies, said Liu.

By end-Feb, a total CNY307.8 billion of local government special bonds were

issued, with the average bid-to-cover ratio exceeding 20 times, he said. 

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

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

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