China Budget Deficit

It has been predicted by the Chinese central government that China budget deficit is likely to be 245 billion yuan or USD$31.6 billion in the year 2007. China budget deficit for 2007 as worked out by the government has been anticipated to be 1.1% of the gross domestic product or the GDP. In the year 2006, the fiscal deficit was 1.3% of the gross domestic product or the GDP.

The expected budget deficit is 30 billion yuan short of what it was in the year 2006. This can be attributed to the fact that growth in the economy encourages tax revenue. China, ranks fourth among world’s largest economies. Of late, China has adopted a “prudent†financial policy. This type of policy was adopted in the year 2005, with an intention of reducing expenses. In the year 2006, China budget deficit was 275 billion yuan. In the same year, China budget deficit of 20 billion yuan was recorded. This figure was much less than what was actually targeted. When all the local governments were taken together, they registered a surplus amounting to 76.7 billion yuan.

China budget deficit- At a glance:

The main intention of the Chinese government is (according to few economists) to exercise control pertaining to growth in investments. At the same time, this fourth largest economy also intends to prevent the economy from being overheated. In 2006, China recorded a trade surplus of USD$177.5 billion. Due to trade surplus, China had approximately USD$1 trillion as reserves.

The government has lowered the growth target to 8%. This is in sharp contrast to the target set by the government pertaining to economic growth in the year 2006. In 2006, the target figure was 10.7%. With regard to revenue, the country intends to gather approximately 4.4 trillion yuan in 2007. Again, this is 14% more than what it was in the year 2006. It is ascertained that the spending may grow by 16% or by an approximate amount of 4.65 trillion.

China budget deficit for the year 2007 is estimated to be 11% less than China budget deficit of 2006. For 2006, the government had fixed the target deficit at 295 billion yuan. Actual growth in revenue in 2006 was 3.93 trillion yuan.

To make the country less dependent on exports, China is increasingly trying to heal the gap prevailing in the income of rural people and those staying in the cities. The government hopes, that by doing so, domestic consumption will go up and people will bank less on exports.

The central government in China, has assigned 130.4 billion yuan for the purpose of investment in the current year(2007). The government had assigned 15 billion yuan less in 2006. Of this, 50 billion yuan has been funded as a result of issuing treasury bonds. During the period 1997-1998, when Asia was facing a financial crisis, the Chinese government had encouraged investment in long term bonds. It was felt by the government that investing in long term bonds would facilitate growth in the economy. Presently the government is slowly withdrawing investments in long term bonds.