China sets 3 percent deficit target, to clamp down on local debt risk

Security personnel stand guard outside the Great Hall of the People ahead of the opening session of the National People's Congress (NPC) in Beijing, China, March 5, 2017. REUTERS/Thomas Peter

BEIJING (Reuters) - China set a budget deficit target of 3 percent of gross domestic product for 2017, in line with last year’s target, and pledged to clamp down on local government debt risk, the finance ministry said on Sunday.

The finance ministry also said in its work plan at the annual meeting of parliament that it would draw up a database of individuals’ income and property holdings, part of its effort to improve tax collection.

It targeted a 6.5 percent increase in fiscal spending and 5 percent growth in revenue, and said the imbalance between revenue and expenditure “remains serious”.

China has tightened controls in recent years on new local-government debt to stave off growing risks from a binge of borrowing taken on to soften the impact of the global financial crisis, but local authorities still carry a heavy debt burden.

“Higher priority will be given to preventing and controlling local government debt risk,” the ministry said, including improving monitoring systems and cracking down on illegal bond issuance at the local level, with an aim to “draw back the veil on hitherto hidden risks”.

The finance ministry set a fiscal deficit target for the year of 2.38 trillion yuan ($345 billion), compared with 2.18 trillion budgeted a year earlier, which was also 3 percent of GDP.

Sources had told Reuters in January that policymakers had in December set a 3 percent deficit target for 2017.

Reporting by Yawen Chen and Elias Glenn; Writing by Tony Munroe; Editing by Will Waterman