China Raises 2016 Deficit to 3% as Leaders Seek to Boost Growth

China raised its projected budget deficit for 2016 to 3 percent of gross domestic product as leaders look to...

China raised its projected budget deficit for 2016 to 3 percent of gross domestic product as leaders look to fiscal policy to boost flagging growth.

The projected deficit is up from 2.3 percent of GDP in 2015, the Finance Ministry said in its 2016 budget. Fiscal spending for 2015 grew 13.2 percent, exceeding a target of 10.6 percent. The figures were released on the opening day of the national legislature’s annual session.

Today’s figure had been broadly flagged in state media as leaders look to revive growth that slowed to the weakest pace since 1990 last year. Last month, central bank officials wrote on the Economic Daily’s website that China has room to increase its budget deficit to 4 percent of gross domestic product.

Concerns have risen about the ruling Communist Party’s ability to maintain growth now that debt levels have climbed to 247 percent of GDP and capital continues to flow out of the country. On March 3, Moody’s Investors Service lowered China’s credit-rating outlook to negative from stable.

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China will keep its fiscal deficit and government debt at a bearable level, the government said in its 2016-2020 Five-Year Plan. Vice Finance Minister Zhu Guangyao said last year the “red line” of 3 percent for the deficit-to-GDP ratio and 60 percent for the debt-to-GDP ratio should be revisited after lessons learned from the financial crisis.

To contact Bloomberg News staff for this story: Huang Zhe in San Francisco at zhuang37@bloomberg.net, Yuling Yang in Beijing at yyang329@bloomberg.net. To contact the editors responsible for this story: Nicholas Wadhams at nwadhams@bloomberg.net, John Liu

By: Bloomberg News

©2016 Bloomberg News

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