Photo: AFP
Economic restructuring and the reform of the supply side needs to provide space for a certain economic growth to meet employment and social stability. Chinese Premier Li keqiang in his Government work report on March 5 morning confirmed in 2016, GDP growth is set to 6.5-7.0%, to that end, the Chinese Government to expand the 2016 deficit ratio to 3%.
Deficit expanded to 3%, this is the first time since 1990, the Chinese Government will extend the deficit ratio to that level. Even in 1998 during the Asian financial crisis and the financial crisis in 2008, China's highest deficit ratio did not exceed 2.6% (2000). Data from the Treasury showed in 2015, the government deficit ratio is 3.48%, 2015 years 2.3% budget set target values.
Concerns about economic growth is spending expansion as well as the main cause of the widening fiscal deficit. The National Bureau of statistics showed that 6.9% 2015 quarter China GDP growth rate, the lowest since the first quarter of 2009.
Economic downturn and the pressure of economic downturn, forcing the Government to take appropriate stimulus for economic development. And 4 trillion in 2008 during the global financial crisis, massive stimulus policies, the current Government has been emphasizing that minimal stimulation. The means of including monetary and fiscal policy.
In terms of monetary policy, the past two years, the Chinese Government has been emphasizing that stability. In the context of increasing downward pressure, in 2015 the Government work report has been a prudent monetary policy slightly modified, robust but "elastic moderate."
China's monetary policy is in the process of fine-tuning. G20 meeting to be held in Shanghai at the end of last month, China's Central Bank Governor Zhou xiaochuan stressed that for the first time, monetary policy to "loose". , China's Central Bank announced that it would reduce reserve requirements for commercial banks 0.5%. However, a move expected to delay for at least a month.
Another factor affecting monetary policy is the Fed's interest rate hikes. United States strong economic data strengthened monetary policy differences between the two countries. If the Fed continues to raise interest rates, while China announced rate cuts, currency spread between China and expansion of the pressures leading to capital outflows, China further increase.
Retain the possible path of capital is not cut, but it deviates from current economic weakness. On February 27, the Central Bank Director media, the Financial Times reported that 2016 monetary policy will work to reduce the cost of financing.
Anyway, great pressures due to currency devaluations and capital outflow, marginal space of the loose monetary policy in the future.
However, in terms of fiscal policy, China still has a lot of space. Central Bank Governor Zhou xiaochuan said that cannot use monetary policy, monetary policy can only solve the total problem cannot solve structural problems, structural problems require fiscal policy to deal with it.
Stimulate economic growth through fiscal policy can reduce currency devaluation pressures, at the same time, accurate punches through fiscal policy, to guide social capital into the real economy.
Prime Minister Li keqiang on February 29 in a meeting with United States Treasury Secretary Jacob Lew said, the Chinese Government has "implemented a proactive fiscal policy there is a large space and be more forceful."
The Government work report just released, said it would continue to implement a proactive fiscal policy, and 2016, China's fiscal deficit in spending widened to 2.18 trillion yuan, compared to 560 billion yuan from last year, the deficit target is set to 3%.
Government work report lived up to the G20 meeting, the Chinese Government has promised flexible implementation of fiscal policy to promote growth, create jobs and boost market confidence.
3% 2015 3.48% over the deficit rate reduction targets the actual deficit has come down, but still better than 2015 deficit target raised to 0.7%. Actual future deficit spending may still exist beyond the current target of a larger scale. People's Bank of China Statistics Department Director Cheng Song even advocated raising the deficit ratio to 4%.
2016 fiscal weaknesses focus areas include corporate tax cuts, as well as people's livelihood, including rail and road infrastructure, inputs, such as in "Thirteen-Five" more than 2.3 trillion yuan during the period. In addition, energy conservation and environmental protection as well as areas of rural infrastructure is the focus of fiscal policy to support object. Beijing daily pension fund rate of return is expected
This will improve the vitality of enterprises and effective investment of stable economic growth is expected.
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