Chinese Finance Minister Lou Jiwei has said at the second news conference of this year's Two Sessions that growth in fiscal income will slow in the future. But the country still has room to increase government debt. [Special Coverage]
Lou said that a larger fiscal deficit ratio this year will help prevent a slide in economic growth and advance structural reform. The Ministry of Finance said Saturday in its work plan unveiled at the annual meeting of parliament that China has budgeted a 2016 deficit of 3 percent of GDP.
"Both budgeting and budget implementations have adhered to the basic principles of the Budget Law, such as budgeting before spending, procedures for budget adjustments, budget details that can be made open to the public, balance mechanisms going beyond the year, medium-term fiscal plans, and the management of debt, especially those concerning local government debt. All these we have managed to carry out," Lou said.
The fiscal deficit to GDP ratio was 2.4 percent in 2015. Lou also said the level of non-performing loans at banks was expected to rise "mildly," and that reform of the tax system was going more slowly than expected.
"The non performing loans ratio at banks is rising, it is rising at a moderate pace," he said.
In addition, Lou said he believes the risk of local government debt is under control.
A total of 5 trillion yuan of local government debt will come due this year. That is while the outstanding amount of such debt stood at 16 trillion yuan at the end of last year.
The Moody's credit rating agency last week downgraded the outlook for Chinese sovereign debt on concerns over the pace of economic reforms and dwindling foreign exchange reserves. Chinese regulators say the move was unjustified.
