China may consider increasing its budget deficit, former finance minister says

A Chinese yuan banknote is seen in this May 31, 2017 photo illustration. REUTERS/Thomas White/File Photo

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BEIJING, July 9 (Reuters) – China may consider further deficit spending by central and local governments, if necessary, to finance support for small businesses, a former finance minister said on Saturday.

To boost consumption, some local governments have issued consumption vouchers, but those steps are still inadequate due to a serious decline in fiscal revenue at all levels, Lou Jiwei said at the Caixin Summer Summit in Beijing.

China has unveiled a series of economic support measures in recent weeks, but analysts say its official economic growth target of around 5.5 percent for 2022 will be difficult to achieve.

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This year, much of the support for the world’s second-largest economy has come from fiscal stimulus to counter the impact of COVID-19.

The cabinet told local governments to ensure 3.45 trillion yuan ($515 billion) in special infrastructure bond issuance – part of the 2022 special bond quota of 3.65 trillion yuan – is completed by the end of June.

China will pre-invest part of its planned 2023 bond issuance in the fourth quarter of this year, with the new quota likely to be more than 1.46 trillion yuan for 2022, sources told Reuters. read more

There is still room for the central government to disburse funds, said Low, who is now on the top political advisory body.

“When necessary, we can increase the central and local budget deficit,” he said.

($1 = 6.6945 Chinese Yuan Renminbi)

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Reporting by Ryan Woo and Tina Qiao; Editing by William Mallard

Our Standards: The Thomson Reuters Trust Principles.

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