China can consider increasing its budget deficits, ex-finance minister says

China can consider increasing its budget deficits, ex-finance minister says. (credits: google)

• Some local governments have distributed consumption vouchers to encourage consumption.
• But those actions remain insufficient.
• China will have difficulty achieving its official 2022 economic growth target of about 5.5 percent.

If more deficit spending is required to fund assistance for small firms, China can consider it, according to a former finance minister on Saturday. Lou Jiwei said at the Caixin Summer Summit in Beijing that while some local governments have distributed consumption vouchers to encourage consumption, those actions remain insufficient because of a sharp reduction in fiscal revenue at all levels.

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Although China has recently released a variety of economic support measures, analysts claim that the country will have difficulty achieving its official 2022 economic growth target of about 5.5 percent. The second-largest economy in the world has received a lot of support this year from fiscal stimulus intended to offset the effects of COVID-19. In order to meet the 3.65 trillion yuan special bond quota for 2022, the cabinet has instructed local governments to issue 3.45 trillion yuan ($515 billion) in special bonds for infrastructure by the end of June. In the fourth quarter of this year, China will issue part of the bonds it plans to issue in 2023 ahead of schedule, with the new quota probably exceeding 1.46 trillion yuan for 2022. Lou, who is currently a member of a leading political advisory group, claimed that there is still some room for the central government to distribute monies. We can raise the central and local budget deficits as needed, he continued. 1 USD equals 6.6945 CNY (renminbi)

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