China's budget deficit will rise to 280 billion yuan in 2009, according to a fiscal budget proposal presented by the Ministry of Finance (MOF) to the State Council, China Business?News reported Monday.
The 280 billion yuan deficit, although still reasonable in the context of China's 4 trillion yuan stimulus package, marks a substantial rise of 100 billion yuan from this year's budget deficit. The jump in fiscal deficit on one hand is in line with the government's shift to an active fiscal policy, on the other hand indicates that China will face more fiscal pressure amid the global financial crisis.
280 bln yuan budget deficit
The MOF has decided on a 280-billion-yuan budget deficit for fiscal year 2009, rising by 100 billion yuan from this year's figure, said a source close to the ministry.
"The 280 billion yuan is the planning deficit in the fiscal budget report; there will be other deficit data in the government's final accounting of revenue and expenditure," the source noted.
Normally the deficit data only shows the state of fiscal balance, and information on how the increased deficit will be used is not specified.
According to the source, the fiscal budget report has been submitted to the State Council and might have been discussed at the Central Economic Work Conference which concluded yesterday.
Growing fiscal pressure in 2009
Although the impact of the global financial crisis on China started to emerge in the second half of this year, China is still looking at a 24 percent fiscal revenue growth in 2008. Based on calculations of the Research Institute for Fiscal Science under the Ministry of Finance, China may still be able to increase by about 20 percent in its fiscal revenues next year.
"We will also see an obvious rise in long-term construction treasury bonds and fiscal deficit in 2009," said Jia Kang, head of the institute. But he argued that even so, China's deficit is still within the safety zone.
Although China's deficit in 2008 reached 180 billion yuan, its nominal deficit ratio still remains relatively low. Jia said that most of the 180 billion yuan deficit had not been invested in projects, but in state funds, such as "the central budget stability and regulation fund, the social security fund and so on."
In the meanwhile MOF officials have agreed on the growing fiscal pressure next year, the above source said.
Fiscal policy targets adjusting economic structure
Monetary policy cannot provide much help in adjusting the economic structure; in contrast, both expanding the deficit and active fiscal policy can impact directly on structural economic adjustment, noted an expert within the government finance system.
According to this expert, the Central Economic Conference would have discussed measures to ensure allocation of fiscal funds and avoid reverting to the old investment pattern in the planned economy.
(China.org.cn by Yan Pei, December 11, 2008)
