China sets 2018 budget deficit goal at 2.6% of GDP

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The deficit as a percentage of GDP in 2018 is projected to be 2.6 percent, 0.4 percentage points lower than in 2017, Chinese Premier Li Keqiang said on Monday.

Li made the remarks when delivering his work report to lawmakers during the opening meeting on Monday of the first session of the 13th National People's Congress (NPC), China’s top legislature, being held in Beijing from March 5 to 20.

China has followed a proactive fiscal policy in 2017, working to adjust the structure of government expenditure, put idle funds to work, and guarantee funding for major projects and meeting basic public needs. The deficit-to-GDP ratio of 2017 was kept within 3 percent, according to Li.

Despite a fairly big imbalance between government revenue and expenditure, “China has led the way in slashing taxes and fees with the aim of using accommodative measures to strengthen the basis for sustained growth,” the premier said.

Meanwhile, China has extended the replacement of business tax with value added tax (VAT) to all sectors across the country, calling time on the 66-year history of business tax. The result so far has been a tax cut of more than 2 trillion yuan (316 billion US dollars), and market entities have seen savings of more than 3 trillion yuan.

This year, China will continue to reform and improve VAT.

“We will turn the three tax brackets into two and adjust rates, prioritize lowering rates in manufacturing and transportation, and raise the threshold of annual sales revenue for small-scale taxpayers. These measures will, over the year, reduce taxes on business and individuals by more than 800 billion yuan,” vowed Li.

The non-tax burden on market entities is expected to be lightened by over 300 billion yuan this year through cutting fees, which will leave enterprises free to focus resources on their development.