THE proactive direction of China’s fiscal policy remains the same for 2018 despite a lower deficit-to-GDP ratio target, Chinese finance minister said yesterday.

The government deficit is projected to be 2.38 trillion yuan (US$380 billion), generally the same as last year, while China will increase fiscal expenditure and local government special bonds, Minister Xiao Jie told a press conference.

China lowered its fiscal deficit target to 2.6 percent of GDP 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, Xiao said.

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 assured 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 on infrastructure this year.

China will also reduce 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 this year, a vital part of the proactive fiscal policy, he said.

Xiao said the fiscal budget will be spent more effectively, with a focus on the country’s “three tough battles,” namely forestalling and defusing major risks, poverty alleviation and pollution control, as well as the supply-side structural reform and improvement of people’s well-being.

Xiao also told the conference that the country’s debt-to-GDP ratio had decreased to 36.2 percent by the end of 2017 from 36.7 percent in 2016, far below the international alert line of 60 percent.

The ratio is also relatively low compared with the levels of major economies and emerging countries, said Xiao, who 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, of which 16.47 trillion yuan belonged to the local governments, according to the minister.

The Chinese government pays close attention to the management of government debt and is firm in cracking down on irregularities in financing activities, he said.

Also, during the conference, Shi Yaobin, deputy finance minister, announced China will strengthen financing and tax support to better serve the Belt and Road Initiative.

The Ministry of Finance is forming an international financing cooperation center in a bid to build a long-term, stable, sustainable, risk-controllable and diversified financing system, Shi Yaobin said.

The ministry will continue to push forward bilateral and multilateral tariff negotiations to promote the building of free trade areas, promote mutual opening up, and soundly implement the tariff concession agreements already signed with countries along the routes.

China will facilitate international tax coordination and cooperation, contribute to eliminating discrimination in tax policy making and implementation, while encouraging more countries to participate in the BEPS (Base Erosion and Profit shifting) project, Shi said.

The Belt and Road Initiative, proposed by China in 2013, aims to build trade and infrastructure networks connecting Asia with Europe and Africa along the ancient Silk Road trade routes to seek common development and prosperity.

So far, the initiative has gained support from over 100 countries and international organizations, according to Shi.

(Xinhua)