China will increase spending to revive the economy

US, WASHINGTON (ORDO NEWS) — China could deploy trillions of RMB fiscal stimulus to revive the economy, which is expected to drop for the first time in four decades against the backdrop of the coronavirus pandemic, while growth targets are likely to be lowered, four sources said.

The increase in spending will be aimed at stimulating infrastructure investment and will be accompanied by the issuance of special bonds of local governments in the amount of up to 2.8 trillion yuan ($ 394 billion), sources said.

They added that the state budget deficit could rise to a record level.

Beijing is likely to be forced to lower the benchmark for economic growth for 2020, given the long-term impact of the pandemic, according to sources participating in internal discussions on economic policy, speaking on condition of anonymity due to the sensitive nature of the issue.

Chinese leaders are considering advisor proposals to reduce the rate to 5% compared to the initial benchmark of about 6%, agreed in December, sources added.

The National Development and Reform Commission, the Ministry of Finance, and the central bank did not immediately respond to Reuters‘ requests for comment.

Private sector analysts are cutting their forecasts for China’s economic growth to lows unseen since the end of the Cultural Revolution in 1976, expecting a significant reduction in the first quarter.

The increase in spending may lead to the fact that the budget deficit ratio in 2020 will reach 3.5% compared to 2.8% last year, sources noted.

Beijing will direct investments in infrastructure, as the recovery in consumption may be slowed by the growth of job losses, while exports may suffer from the effects of the pandemic on the global economy, sources say.

The government intends to accelerate the construction of planned key infrastructure projects, as well as launch new projects in the field of healthcare, supplies of materials for emergencies, 5G networks and data centers, which were approved by senior management, sources said.


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