Slowing growth won’t stop China from finding a few silver linings at its annual legislative session.
The world’s second-largest economy will be raising its fiscal deficit target slightly in 2019, to 2.8% of GDP, a mere 0.2 percentage point rise from 2018. The target is still lower than the 3% international deficit warning, which is also less than that of other major economies.
At the National People’s Conference, Liu Kun, China’s minister of finance, said the target has factored in a balance of fiscal profits, spending, and the issuance of “special-purpose debts” while leaving room for “macro regulation.” He noted that the emerging market’s government debts are used mostly for investing rather than operational costs and employee payments, which occurs in many other countries.
Liu wants to enhance efforts to keep steady economic development while accommodating tax and fee cuts. This would shrink the burden on enterprises while surging markets. The minister said earnings from designated state-owned financial institutions and businesses directly under the central government will get a boost. Local governments will be asked to invest funds and assets through “multiple avenues.”
One of those roads is infrastructure.
He Lifeng, head of China’s National Development and Reform Commission, said the government is cracking down on all investments that would create new debt or wind up only partially finished.
He did not name any specific targets nor any current projects as an example.
“Financing will support projects that are under construction or new ones that serve the overall economic and social needs,” the official said.
Railway, road construction, and waterway projects are some of China’s current plans, according to a government work report. The programs will cost about 1.2 trillion Yuan, or $178.7 billion. Roughly $86 billion is in the central government budget for related investments this year.
Lifeng also said government spending and industrial policies will go toward more private investments, adding that 62% of the total fixed-asset investments were in private capital. About 35% were made in manufacturing and equipment upgrades.