China to control deficit-to-GDP ratio at 3% this year to ensure fiscal sustainability: official

A worker counts Chinese currency at a bank in Linyi, East China's Shandong Province. (Xinhua/Zhang Chunlei)

China has set the deficit-to-GDP ratio for this year at 3 percent. The goal not only conforms to the current conditions of the overall recovery of the Chinese economy, but also helps control the government's overall debt levels and increase fiscal sustainability in order to reserve larger policy room for dealing with possible risks and challenges in the future, an official said on Tuesday following the release of the Government Work Report.

The deficit-to-GDP ratio is an important indicator that reflects a government's fiscal policy strength and potential fiscal risks.

Generally, there is a "red line" of a 3-percent fiscal deficit ratio, but it's not golden rule as many countries' deficit-to-GDP ratio may far outpace 3 percent or even reach double digits when needed, Huang Shouhong, head of the government work report drafting team and Director of the State Council Research Office, said at a press conference in Beijing.

China's deficit-to-GDP ratio has been kept at a reasonable and appropriate level over recent years, from considerations including supporting economic development, preventing fiscal risks and achieving fiscal sustainability, Huang said, noting that the country's deficit-to-GDP ratio has stayed under 3 percent for most of the past years, except in 2020 and 2021.

Huang said the central government set a deficit-to-GDP ratio of 3 percent in the beginning of 2023, which was later raised to 3.8 percent, caused by the issuance of an additional 1 trillion yuan ($139.3 billion) in special treasury bonds.

"Although this year's deficit ratio is slightly lower compared with last year's after the issuance of government bonds, the overall level is appropriate," Huang said.

With the 3 percent planned fiscal deficit rate, the government deficit is expected to reach 4.06 trillion yuan ($560 billion) in 2024, with an increase of 180 billion yuan from 2023 levels, according to this year's Government Work Report.

It is expected that fiscal revenue will continue to resume growth this year, and the budget expenditure will likely reach 28.5 trillion yuan in 2024, increasing 1.1 trillion yuan from last year.