China to defy analysts with plan for unchanged deficit

Bloomberg

Chinese authorities plan to propose that this year’s fiscal deficit stay at 3 percent of gross domestic product, unchanged from 2016, according to people familiar with the matter, signaling further tolerance for slower economic growth.
The budget deficit, usually announced in March, requires approval by the National People’s Congress and is subject to change, said the people, who asked not to be identified as the proposal hadn’t yet been made public.
Many economists had forecast that the gap would increase in 2017, thereby strengthening the hand of authorities to shore up the economy with fiscal policy. A decision to hold the deficit at 3 percent of GDP would echo sentiments expressed by senior Chinese leaders last month that they’ll place greater emphasis this year on curbing financial risks, even at the expense of growth. China’s deficit ratio has increased every year since 2012, with economists having expected it to rise again this year to 3.5 percent, according to the median estimate in a survey conducted by Bloomberg.
At the same time, Chinese authorities also have other off-budget tools, such as using bond issuance by state-owned policy banks to fund construction projects. China’s fiscal deficit ratio last year could have exceeded 10 percent when taking into account such spending.