SHANGHAI Dec 13 China may increase its deficit
to 3.5 percent next year in order to hit its economic growth
target, the 21st Century Business Herald reported a senior think
tank official saying on Tuesday.
If the government targets GDP growth of 6.5 percent next
year, the deficit must increase by 0.5 percentage points to make
up for tax reductions and to maintain government spending, Zhu
Baoliang, chief economist at the State Information Center (SIC),
said recently in an interview.
China's monetary policy cannot be loosened because of the
expected increase in U.S. interest rates, Zhu added.
The comments follow the SIC saying on Monday that China
should set an economic growth target of around 6.5 percent for
2017, although it is very likely that it will be able to exceed
The government already looks set to meet its 6.5 to 7
percent target for 2016, due in part to higher government
The State Information Center is an official think tank
affiliated with the National Development and Reform Commission,
a powerful economic planner.
In 2017, consumption will be weaker, Zhu said. This year,
the rate of growth of income was lower than that of GDP, which
will have an impact on consumption, he added.
In the short-term there is yuan depreciation pressure, but
not in the long-term, Zhu said.
"I am a little worried about the outflow of capital, mainly
how capital outflow will affect domestic monetary policy, which
may bring short-term risks," said Zhu.
He added that the yuan has depreciated for two years and
China's exports have not improved significantly due to weak
economic growth and trade protectionism.
(Reporting by Engen Tham and Wang Jing; Editing by Kim Coghill)