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China to increase 2013 deficit to 1.2 trillion yuan

English.news.cn   2013-03-05 08:58:31            

by Xinhua writers Cao Kai, Han Jie and Zhang Zhanpeng

BEIJING, March 5 (Xinhua) -- The Chinese government is projecting a fiscal deficit of 1.2 trillion yuan (191 billion U.S. dollars) for 2013, 400 billion yuan more than the budgeted figure last year, according to a government work report delivered to the national legislature on Tuesday.

The deficit consists of a central government deficit of 850 billion yuan and 350 billion yuan in bonds to be issued on behalf of local governments, the report said.

"It is necessary to appropriately increase the deficit and government debt, as the time lag of past structural tax cuts will make it hard for government revenues to grow rapidly this year, while fixed government expenditures will increase," the report said.

China has a relatively low debt-to-GDP ratio and the increase in the deficit this year will bring the deficit-to-GDP ratio to a safe level of about 2 percent, according to the report.

The increased spending will be used to ensure and improve the people's well-being and maintain support for economic growth and structural adjustments, it said.

Although some countries are struggling to cut deficits in 2013, the Chinese government is expanding its deficit, which shows its desire to release bonuses that can drive economic growth and improve the quality of its development at the same time, experts have said.

The increased deficit will ensure that the government has enough money to increase its investment in education, health care and social security, said Gao Peiyong, head of the National Academy of Economic Strategy under the Chinese Academy of Social Sciences.

In the long-term, the deficit increase will be conducive to expanding domestic demand and maintaining economic growth, Gao said.

The deficit increase will also provide more room for tax cuts, he said.

Value-added tax reform, replacing the turnover tax with a value-added duty in the transportation sector and some service sectors have reduced taxes by over 40 billion yuan for more than 1 million taxpayers in 12 pilot regions as of Feb. 1, according to the Ministry of Finance.

Although an increased deficit would normally increase financial risks, China's financial risks are still controllable at the moment, Gao said.

A deficit-to-GDP ratio of less than 3 percent and a government-bond-outstanding-balance-to-GDP ratio of less than 60 percent are considered safe and controllable according to international standards, Gao said.

The ceiling for the outstanding balance on government bonds in the central budget in 2013 stands at 9.12 trillion yuan, which accounts for less than 20 percent of the GDP, according to a report on China's central and local budgets provided by the Finance Ministry and submitted to the first session of the 12th National People's Congress for deliberation on Tuesday.

Although China's financial risks are controllable at the moment, the government still needs to be cautious of potential risks, Gao warned.

It will be more difficult this year for the central and local governments to keep a balance between revenues and expenditures due to a harsh global economy. 2013 will also be a peak year for local governments to pay their debts, Gao said.

Local governments should take measures to prevent potential risks from becoming real risks, Gao said, adding that they must be cautious of a new round of increased investment and strictly control new debts.

Han Deyun, a lawyer and member of the national legislature, asked local governments to be frugal and fully utilize the supervisory functions of the legislature, advisory bodies, audit departments and the public to make sure government spending is open and transparent.

Editor: Zhu Ningzhu
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