Free Trial

REPEAT: MNI: China Modest Deficit Hike Notes Risks: Advisor

MNI (London)
Repeats Story Initially Transmitted at 10:09 GMT Mar 8/05:09 EST Mar 8
     BEIJING (MNI) - In setting a higher, but lower-than-expected, deficit ratio
for this year, China is attempting to project a sense of fiscal discipline and
risk awareness as it plans an unprecedented CNY2 trillion tax-and-fee cut
stimulus package, government advisors told MNI.
     When setting the deficit-to-GDP ratio, policymakers had to consider fiscal
responsibility and allow room for contingencies, Liu Shangxi, head of the
Chinese Academy of Fiscal Sciences (CAFS) under the Ministry of Finance, told
MNI. 
     Having already authorized increased local government special bonds quotas
and allowed bigger local government deficits, Beijing does not need to raise
central government's debt/GDP ratio, Liu said. 
     On Tuesday, Premier Li Keqiang said the government was targeting a deficit
ratio of 2.8% this year from 2.6% in 2018, allowing the budget deficit to rise
by CNY380 billion to CNY2.76 trillion, confirming MNI's previous reporting that
the 3% deficit ratio wouldn't be breached this year.
     According to Liu, keeping the deficit below 3% didn't trigger a round of
excessive fiscal expansion and was in line with Premier Li's oft-repeated mantra
of not flooding the economy with stimulus.
     To help balance the books, China has cut the spending growth target to 6.5%
from 8.7% in 2018, with revenue growth dropping to 5% from 6.2%.
     --CORPORATE TAX
     Presented with a raft of plans to cut the tax burden, the authorities
discussed but decided against cutting the overall corporate income tax (CIT).
     "It is not necessary for an overall corporate income tax cut as we have
already launched a tax cut targeting small businesses this year," Sun Ruibiao,
the deputy head of the State Administration of Taxation, told MNI. 
     The current 25% nominal corporate tax rate in China isn't high compared
with other countries, he said.
     Zhang Bin, a researcher at the National Academy of Economic Strategy of the
Chinese Academy of Social Sciences, said a series of preferential tax measures
already brought the actual CIT rate below the average 25% nominal rate.
     "Compared with value-added tax and social insurance contribution cut, a
reduction in corporate income tax is not so urgent," and cutting taxes won't
help unprofitable firms, Zhang said.
     --'VERY TOUGH TIME'
     Underlining the fact budget compromises were -- and will -- be needed,
Finance Minister Liu Kun said this week that fiscal authorities will have a "
very tough time" coping with the pressures of balancing spending and revenue.
     Some see a silver-lining in the gathering gloom, with CAFS's Liu Shangxi
saying belt-tightening measures could be an opportunity to pressure government
into reform and improve efficiency.
--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
}); window.REBELMOUSE_ACTIVE_TASKS_QUEUE.push(function(){ window.dataLayer.push({ 'event' : 'logedout', 'loggedOut' : 'loggedOut' }); });