China will fend off systematic risks to the economy with a proactive fiscal policy that will remain the same as last year but target a lower deficit-to-GDP ratio, China's finance minister said on Wednesday.
China's total outstanding government debt stood at 29.95 trillion yuan ($4.74 trillion) in 2017, with a debt-to-GDP ratio of 36.2 percent, China's Finance Minister Xiao Jie told a press conference on the sidelines of the two sessions on Wednesday.
"The ratio is far below the so-called alert line of 60 percent applied in the international community, and is also below that of other major economies and some emerging countries," Xiao said, noting that the Chinese ratio was higher in 2016 when it stood at 36.7 percent.
The government debt ratio will not change significantly in the next few years, he promised.
In terms of further strengthening the management of local government debt, Xiao noted China will continue to take an approach he called "opening the front door" and "blocking the back door."
Xiao explained that "opening the front door" will mean local government special bonds will total 1.35 trillion yuan this year, up 550 billion yuan from last year. "Blocking the back door" refers to a continued crack down on illegal financial practices.
"Whoever raises the debt will be responsible for it," he said, adding the measures will prevent China from suffering systemic risks.
Qiao Baoyun, a professor at the Beijing-based Central University of Finance and Economics, told the Global Times that there is some non-transparent and illegal debt held by local governments that should be tackled and normalized to ensure the rule of law and to serve the country's macro economy.
"I think the biggest highlight is expanding the scale of special bonds in 2018. They can perform a better role in the market economy by opening the door wider," Qiao said.
"Local governments still have a lot of demand for infrastructure construction. The repayment of special bonds will come from the profits of the projects instead of government revenues. This will greatly promote the development of local bond markets while meeting the construction needs of governments on the local level," Qiao told the Global Times on Wednesday.
Public debt funds a lot of important local infrastructure projects such as roads, subways and other public services, said Ye Qing, deputy director of the statistics bureau of Central China's Hubei Province.
"China's debt risks are on the whole manageable," said Ye.
"We are fully capable of preventing systemic risks," said Chinese Premier Li Keqiang when he delivered the government work report at the opening session of the 13th National People's Congress on Monday.
"China needs to tackle both symptoms and root causes and take effective measures to defuse potential risks," Li said.
Proactive fiscal policy remains
Premier Li also announced on Monday that China has reduced its fiscal deficit target to 2.6 percent of GDP from 3 percent in 2017, the first decline since 2013.
"I'm clearly telling everyone that the proactive fiscal policy's orientation has not changed despite this year's fiscal deficit ratio declines," the finance minister said.
"The ratio reduction is in line with steady economic growth and continuous improvement of financial performance," Xiao said, noting that it will also leave more room for China's economic development over the long term.
Qiao said adjusting the deficit target is a far-sighted and correct decision amid the complex international economic environment and China's economic transformation.
"In the face of necessary expenditures and lower taxation, the Chinese government needs to restrict spending on projects that produce low marginal benefits," he noted.
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