China’s budget deficit in 2016 to reach three percent GDP

Beijing, Jan 31 (IANS) China’s proactive fiscal policy will continue in 2016 and its general public budget deficit will expand, the China International Capital Corp. (CICC) said.

CICC analysts expect the deficit this year to reach 2.2 trillion yuan ($336 billion), or three percent of the country’s gross domestic product (GDP), Xinhua reported.

The note came after a national fiscal work conference statement said last month that China would increase its budget deficit in 2016, gradually raise its fiscal deficit ratio.

In an effort to shore up growth, China raised its deficit-to-GDP ratio to 2.3 percent for 2015 from 2.1 percent in 2014.

A three percent deficit ratio is normally considered a red line not to be crossed, but opinions favour a higher ratio as it enables the government to cut taxes, encouraging more production.

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