China must raise deficit-to-GDP ratio to 3%: analyst
20 December, 2018
Zhang Lianqi, managing partner at Ruihua Certified Public Accountants, believes it is necessary to raise the deficit-to-GDP ratio target to 3% in 2019, Securities Daily reported.
Zhang also suggests the government lower the ceiling on the value-added tax from 16% to 13%, and gradually reduce corporate income tax from 25% to 20%.
According to reports, large scale tax cuts and local government bond issuance are expected for the year ahead.
Huang Zhilong, director of the Macroeconomic Research Center at Suning Institute of Finance, thinks it unlikely the deficit ratio will break 3%, but it is still possible to be set at 3%.
Based on the 3% ratio, Huang estimates that China’s fiscal deficit will be about 3 trillion yuan in 2019.
The fiscal deficit in 2018 was 2.38 trillion yuan, with the deficit ratio declining from 3% in 2017 to 2.6%.
Huang estimates that the issuance of local government bonds in 2019 could fall to 2.5 to 3 trillion yuan.