China will maintain a proactive fiscal policy in 2016, including an increase in fiscal deficit ratio to 3 percent given the relatively low liability ratio of the Chinese government among world economies, a senior official with the Ministry of Finance (MOF) told People’s Daily.

“The Chinese government currently has a 40 percent debt ratio, which still leaves room for a reasonable rise,” added the official.

As for the debt of local governments, which has drawn wide attention, the official said that the MOF will urge local governments to strictly abide by the Budget Law, and follow the regulations of the State Council, China’s cabinet.

Management of local government debt will be tightened, the role of government and market will be clarified, and fiscal and financial risks will be prevented, added the official.

In the latest 2016 budgetdraft released by the MOF, China put a ceiling on the debt of local governments, demanding the total outstanding amount to be kept under 17.2 trillion yuan ($2.6 trillion) at the end of 2016.

The official added that the risks are under control as the liability rate of the local government debt is estimated to be below the 100 percent gate line.

Risk management should be strengthened, said the official, elaborating that the MOF will improve its risk assessment and early warning mechanisms. It will tighten financing supervision as well.

Meanwhile, local governments need to step up the marketization and fund-raising of their financing platforms, and transform entity financing platforms into market entities.

In this way, such platforms will operate independently. They can raise funds and pay debt following market rules, and local governments will no longer shoulder their risks, or pay their debts, the official added.

Regarding the corporate debt level, the official explained that due to the world economic slowdown in recent years, some industries in China encountered overcapacity, giving rise to a growth in corporate debt and leverage ratio.

However, China's enterprise debt is within a reasonable levelcompared with the global warning level of 70 percent, the official pointed out, adding that the current enterprise asset-liability ratio in the real economy is about 60 percent, only a 5 percent rise from that in 2009.

He further stressed that China has taken several measures to deal with debt structure. For example, it has lowered enterprise leverage through debt-to-equity swaps. Also, the government dealt with "zombie companies" to wipe out a batch of industries suffering from overcapacity through merger, reorganization and debt restructuring.

China also allocated 100 billion yuan to relocate workers laid off as a result of its efforts to curb overcapacity, so that a balance can be struck between de-capacity, development and employment.

What’s more, the government is encouraging direct financing. By the end of 2015, direct financing accounts for 13.9 percent of social financing stocks, which is 1.3 percent higher than that of the last year, the official added.