China’s finance minister sees ample fiscal policy room

Beijing, March 4 (IANS) China still has ample room to expand its fiscal policy to tackle downward economic pressure and push supply-side structural reforms, Finance Minister Lou Jiwei has said.

The country’s deficit-to-GDP ratio is under the three percent warning line, and its debt-to-GDP ratio is not at a high level, Lou told Xinhua.

Debt risks are under control and the combined central and local government direct debt accounted for nearly 40 percent of the GDP last year, he said.

International institutions usually use two indexes to evaluate a country’s fiscal risks — its deficit should not exceed 3 percent of its GDP and general government debt-to-GDP ratio should not exceed 60 percent.

With China’s economy growing at its lowest rate in 25 years, Lou said a pivotal issue is to better arrange the order and priority of structural reforms to balance efforts between managing short-term challenges and promoting long-term development.

He said to win long-term gain, China must take the short-term pain from some structural reforms, including reduction of industrial overcapacity and destocking housing inventory, while reform policies, which are more efficient in producing economic benefit, should take preference.

Lou made similar remarks during the G20 Finance Ministers and Central Bank Governors Meeting last week, when he predicted an increase in China’s budget deficit this year.

China raised its budget deficit to 2.3 percent of GDP in 2015, up from 2.1 percent in 2014.

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