China’s fiscal deficit exceeding the government’s preset limit last year was a sign it is easing policy further, Nomura Holdings Inc economists wrote in a report yesterday.
China’s fiscal spending last year jumped 15.8 percent to 17.6 trillion yuan (US$2.68 trillion), while revenue rose 8.4 percent to 15.2 trillion yuan, the Chinese Ministry of Finance said on Friday.
That amounts to a fiscal deficit equal to 3.5 percent of GDP, Nomura Hong Kong-based chief China economist Zhao Yang (趙揚) said in a report yesterday.
The government had previously set the fiscal spending limit at 2.3 percent of economic output.
China boosted fiscal spending as growth last year slowed to its weakest pace since 1990 and the central bank’s interest rate cuts appeared insufficient to revive slumping demand.
Economists had expected the government to exceed its budgeted limit last year and expand the deficit this year, according to a Bloomberg survey conducted in November last year.
“This fiscal deficit of above 3 percent, together with relatively large quasi-fiscal easing, also suggests to us that the government is willing to ease policy as growth slows,” Zhao wrote.
China might raise the fiscal deficit limit for this year to 3 percent of GDP when China’s National People’s Congress approves the annual budget next month, Zhao wrote.
He forecast growth this year of 5.8 percent.
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