China’s proactive fiscal policy will persist and become more forceful in 2016, an official statement said on Dec 28.
China will increase its budget deficit next year, gradually raise its fiscal deficit ratio, increase government debt issuance and set a limit for newly increased local government debt, according to a statement issued after a national fiscal work conference.
China will continue to cut taxes and avoid overcharging enterprises so they have more money at their disposal, and the government will spend the money more wisely, the statement said.
China raised its fiscal-deficit-to-GDP ratio to 2.3 percent for 2015, compared with 2014’s target of 2.1 percent. Experts believe that China is expected to raise the number to 3 percent or higher in 2016 in an effort to shore up growth.
A 3-percent deficit ratio is normally considered a red line not to be crossed, but opinions favor a higher ratio as it enables the government to cut taxes, encouraging more production.