Coronavirus: China to raise fiscal deficit ratio after G20 pledges US$5 trillion economic rescue package

President Xi Jinping says China will raise its fiscal deficit ratio and issue special bonds to stimulate the economy

China has already contributed US$344.1 billion to the global economic rescue package announced by the G20, foreign ministry says

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The Chinese leadership, including President Xi Jinping, at an extraordinary cirtual leaders' summit on Covid-19. Photo: EPA-EFE

Published: 9:00pm, 27 Mar 2020Updated: 11:45pm, 27 Mar 2020

President Xi Jinping said on Friday China would step up efforts to stimulate the economy by raising the fiscal deficit ratio and selling special government bonds, a day after the G20 pledged to do “whatever it takes” to help protect global growth from the coronavirus pandemic.

Speaking at a Politburo meeting, Xi said that China was working on “a package of macroeconomic policies” to propel growth in the world’s second biggest economy, which is in danger of suffering its first contraction this quarter since 1976.

“The fiscal policy will be more proactive and forceful, while the prudent monetary policy will be more flexible,” he said, according to the official Xinhua News Agency. “We will raise the fiscal deficit ratio and issue special treasury bonds, in addition to an expansion of local government special purpose bond issuance.”

The comments make clear that China will go further to aid growth and is ready to budget a fiscal deficit above 3 per cent of gross domestic product in 2020, although the president did not give any specific numbers.

China’s turn to a more aggressive pro-growth stance comes as the coronavirus, which has infected more than half a million people across the world, weighs heavily on the global economy and on China’s exports.

Xi said China’s value chains were facing “new challenges” as the pandemic hit the global economy.

The China International Capital Corporation (CICC), China’s most prominent investment bank, lowered its growth forecast for China this year to only 2.6 per cent, well below its previous projection of 6.1 per cent.