CXSE - China lowers budget deficit target for 2024; special debt may cover other costs

2023-12-15 04:22:01 ET

China is expected to run a budget deficit of 3% of its gross domestic product next year, lower than the revised 3.8% target for 2023 as Beijing aims to maintain fiscal discipline, Reuters reported citing sources. Its economic growth target is around 5% in 2024.

Off-budget sovereign debt may cover other fiscal support and expenditures, including a potential special sovereign bond issuance amounting to 1T yuan ($141.91B). Special bonds, which are not included in China's annual budget, are used to raise funds for projects or policy goals when needed.

The bond quota for local governments could be around 4T yuan ($563.49B) next year, compared to this year's 3.8T yuan, one of the sources said .

The official targets will be announced publicly during China's annual parliament meeting that usually happens in March. The targets were prepared during the Central Economic Work Conference, during which President Xi Jinping and other officials drafted China's budget plans for 2024.

The leaders agreed to implement a proactive fiscal policy, according to state-run news agency Xinhua , along with efforts to maintain sufficient liquidity in line with economic growth targets.

Financial institutions should be guided to scale up support for scientific and technological innovation, the leaders agreed. In addition, overall financing costs must steadily drop while the RMB exchange rate is maintained at a reasonable level.

China's fiscal position is under threat, with Moody's cutting the country's government credit ratings to negative as its government will likely have to bail out financially stressed local governments and state-owned enterprises, as well as tame its property crisis .

Currency: ( CNY:USD )

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