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China Official Says Increasing Debt Level Feasible and NecessaryBy Bloomberg

(Bloomberg) -- China’s plans to raise its debt level to stimulate demand and combat the economic effects of the coronavirus pandemic are feasible and necessary, a senior official at the country’s top economic planning agency said Sunday.

The government’s plan to raise its fiscal deficit and sell anti-virus government bonds are “special measures” in response to an unprecedented environment, and the scale of the borrowings takes into account both the economic impact and the need to control debt-related risks, according to Cong Liang, a senior official at the National Development and Reform Commission.

“An appropriate debt level can help with economic and social development, and sound economic and social development can help control the debt level,” Cong said at a press conference on Sunday. The government debt ratio was at 38.5% of gross domestic product by 2019, which is still relatively low globally, he said.

“We need to face realities and increase the debt level as appropriate,” Cong said.

China has pledged to significantly increase government borrowings this year and expand domestic demand as its income declines and economic growth slows to the lowest level in decades. Premier Li Keqiang pledged a fiscal deficit of more than 3.6% of gross domestic product , the highest level in at least a decade, in addition to about 3 trillion yuan ($420.8 billion) of leftover funds, 1 trillion yuan of anti-virus debt and another 3.75 trillion yuan of special local debt to finance infrastructure construction.

The augmented fiscal-deficit ratio could reach about 11%, if the government spends all that it plans to, up by 5.5% of GDP compared with last year, according to economists at Standard Chartered Plc.

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