China’s policymakers plan to keep their budget deficit target for 2017 at the same level as last year to underscore a focus on debt reduction and reform, though they have wiggle room to increase fiscal stimulus if the economy needs support again. A budget deficit target of 3 per cent of gross domestic product, unchanged from 2016, was endorsed by top leaders at the Central Economic Work Conference in December, according to sources with knowledge of the meeting’s outcome. After government investment propped up activity for much of 2016, policymakers are looking for a recovery in private investment through public-private partnership (PPP) infrastructure projects to drive growth this year. Fiscal policy is clear. It’s necessary to maintain last year’s 3 per cent deficit ratio, although there is room to increase it slightly,” said one of the sources, a policy adviser. Preliminary finance ministry data this week implied an actual deficit of 3.8 per cent of GDP in 2016. However, China’s budget accounting allows it to use unspent money from previous years and funds from a Central Budget Stabilisation Fund so it can report a final deficit in line with the target. The world’s second-largest economy grew 6.7 per cent last year, supported by higher government spending and record bank lending, though it was still the slowest growth in 26 years.
