China to propose wider 2019 fiscal deficit amid slowdown

[BEIJING] China's Finance Ministry is set to propose a small increase in the targeted budget deficit for this year as officials seek to balance support for the economy with the need to keep control of debt levels.

The ministry agreed the proposed deficit target of 2.8 per cent of gross domestic product at its annual work conference in December, two people familiar with the matter said. The figure, which compares with 2018's target of 2.6 per cent, will be presented for approval at the National People's Congress, China's legislature, in March. The final number could still change.

While officials have pledged a pro-active fiscal policy this year amid a slowdown in the economy that's being worsened by the trade war with the US, the proposed deficit expansion is smaller than many economists had forecast. At the same time, officials can use so-called special bonds, which don't affect the overall budget, to finance local government projects and spur infrastructure investment.

The people asked not to be named as the matter isn't public. The Finance Ministry didn't immediately respond to a fax seeking comment.

BLOOMBERG