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Deficit increase doesn’t signal strong stimulus

Updated: Mar 5,2016 9:05 PM     Xinhua

China’s higher fiscal deficit rate budgeted for 2016 should not be considered strong stimulus, and the country still has ample policy tools to arrest downward economic pressure, a senior official of China’s Cabinet research office said on March 5.

A 3-percent deficit-to-GDP ratio is within a safe margin and is still relatively low compared with that of many developed countries, which set the ratio well above 3 percent, said Huang Shouhong, deputy director of the State Council Research Office at a news conference.

China will increase deficit-to-GDP ratio to 3 percent this year from 2.3 percent last year, and cut taxes across the board, Premier Li Keqiang said on March 5 at the annual parliamentary session.

The expansion is mainly aimed at reducing costs for firms, and should not be interpreted as strong stimulus, Huang said.

For the past few years, the government has refrained from using mass quantitative easing to battle the economic slowdown but rather has pushed structural reforms, which proved successful in reinvigorating the economy.

“The Chinese government still has enough innovative policy tools to battle the downward pressure,” Huang said. “With enough weapons and bullets, we can fire whenever we need.”

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