China Says Fiscal Support to Remain Flexible, Debt Ratio 'reasonable'
MichelleChina's fiscal policy has ample room, the government's debt ratio remains "reasonable" and risks are controllable, Finance Minister Lan Foan said on Friday, pledging a more flexible fiscal push to shore up economic growth.
China's fiscal policy has ample room, the government's debt ratio remains "reasonable" and risks are controllable, Finance Minister Lan Foan said on Friday, pledging a more flexible fiscal push to shore up economic growth.
The world's second-largest economy has been hobbled by persistently weak domestic demand, a multi-year property crisis and mounting US trade pressure. Exports slowed in August as the boost from a US tariff truce faded, fuelling calls for more stimulus.
"Fiscal policy...always keeps contingency measures in reserve and there remains ample room for stronger fiscal support in the future," Lan said at a press conference in Beijing.
"Next, the Finance Ministry will continue to maintain policy continuity and stability, enhance flexibility and foresight and strengthen forward-looking assessments of the situation," he added.
China late last year increased the amount of debt that local governments are allowed to raise through special bonds by six trillion yuan (US$840 billion or RM3.54 trillion) over 2024-2026. As of end-August, four trillion yuan had already been issued, Lan said.
By end-2024, China's overall government debt hit 92.6 trillion yuan, comprising 34.6 trillion yuan in national debt, 47.5 trillion yuan in legal local government debt and 10.5 trillion yuan in local government hidden debt, according to the minister.
China's government debt-to-gross domestic product ratio was 68.7%, compared with 118.2% for the average ratio of Group of 20 major economies and 123.2% for the Group of Seven, Lan said.
"Overall, China's government debt ratio is within a reasonable range, and risks are under control."
Transformation of local government financing vehicles (LGFVs), set up by local governments to fund infrastructure projects such as bridges and roads, has been under spotlight of China's debt clean-up.
Lan said as of end-June, more than 60% of LGFVs had cleared their hidden debt, while reforms are accelerating.
With key August data due next Monday, some analysts expect new spending plans and housing support.
