Firm stance on debt control remains despite spending set to rise by 7.6%
Print Edition
CHINA is confident of fully forestalling systemic risks.
Voicing a firm stance on debt control, Minister of Finance Xiao Jie said yesterday that the country’s debt-to-GDP ratio fell to 36.2 percent by the end of 2017 from 36.7 percent in 2016 — far below the international alert line of 60 percent.
Xiao told a press conference during the ongoing session of the National People’s Congress that the ratio is also relatively low compared with the levels of major economies and emerging countries. He expects “no significant change” in the ratio in coming years.
By the end of last year, combined debt of central and local governments in China stood at 29.95 trillion yuan (US$4.7 trillion), of which 16.47 trillion yuan was held by local governments, the minister said.
The government deficit is projected to be 2.38 trillion yuan, generally the same with last year, while China will increase fiscal expenditure and local government special bonds.
The Chinese government pays high attention to the management of government debt and is firm in cracking down on irregularities in financing activities, Xiao added. With a new budget law and a number of follow-up measures in place, the government has established a closed-loop system that covers quota management, budget management, risk early warning, emergency response and daily oversight.
Nearly 100 people were held responsible for misconduct and irregularities related to local government debt last year as the country strengthens its efforts to defuse financial risks, Xiao said.
To forestall and defuse major risks has been listed as one of the country’s “three tough battles” for the next three years, along with targeted poverty alleviation, and pollution prevention and control.
The proactive direction of China’s fiscal policy remains the same for 2018 despite a lower deficit-to-GDP ratio target, Xiao said.
China lowered its fiscal deficit target to 2.6 percent of gross domestic product for 2018, down by 0.4 percentage points compared with 2017, the first drop since 2013.
The reduction in the deficit-to-GDP ratio is mainly due to steady economic growth and the stable foundation for an increase in revenue, which also keeps policy options open and flexible for macro-regulation.
Despite a lower deficit-to-GDP ratio, China has raised the budget for this year’s general public expenditure by 7.6 percent to 21 trillion yuan, higher than a 6.1 percent rise in budget revenue.
Xiao added that the lower ratio will not affect infrastructure investment, citing a 550 billion yuan increase in local government special bond issuance and a 30 billion yuan rise in central government investment in infrastructure this year.
China will cut taxes on businesses and individuals by more than 800 billion yuan and lighten the non-tax burden on market entities by over 300 billion yuan in 2018, a vital part of the proactive fiscal policy, Xiao said.
Also yesterday, Vice Minister of Finance Shi Yaobin said China will develop its property tax system on the basis of thorough consideration of domestic conditions and practices in other countries.
Taxing real estate is a common practice taken by many countries with the aim to boost fiscal revenue while readjusting income distribution for social fairness, Shi said. In many countries, the tax is levied on industrial, commercial and individual properties in accordance with respective assessed values; tax reduction is granted to low-income and disadvantaged groups; the tax is levied by local governments for public services purposes.
Shi said the finance ministry and the national legislature will take reference of these common practices during the drafting of the real estate tax law.
He added that China’s own specific conditions will also be considered, such as necessary integration of some other taxes, and the reduction of tax burdens on the real estate development and trade.
China will prudently advance legislation on real estate tax, according to the government work report released on Monday.
The Budgetary Affairs Commission of the National People’s Congress Standing Committee and the Ministry of Finance are jointly drafting the law, and debate on important issues and internal consultations are under way, Shi said.
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