(Yicai) March 6 -- China has set its fiscal deficit target for local governments to be CNY720 billion (USD100 billion) this year, unchanged for the third straight year, according to the official budget that Xinhua News Agency was authorized to release yesterday.

The sum is not new as the deficit, financed by new bonds, remained the same last year and in 2022 after jumping to a high level of CNY980 billion in 2020.

This year's addition of CNY180 billion in total fiscal deficit will be fully covered by the central government, Luo Zhiheng, chief economist at Yuekai Securities, told Yicai, referring to widening spending. The central government will make up 82 percent of the total deficit, the highest level in recent years, Luo added.

Local governments have high borrowing costs and short repayment periods, Luo said. In comparison, the central government has large room for leverage with low costs and long maturity, so the central government should make transfers to local administrations to ease their imbalance in revenue and spending, the chief economist added.

This year, transfer payments from the central general public budget to local governments will total CNY10.2 trillion (USD1.4 trillion), up 4 percent from last year, excluding temporary factors such as tax and fee cuts as well as after-disaster reconstruction, per the report.

The central government will issue CNY1 trillion (USD138.9 billion) in ultra-long-term special government bonds this year and give some of the money to local authorities by transfer payments.

As of Dec. 31, last year, China's balance of central government debt was around CNY30.03 trillion whereas that of local governments was CNY40.74 trillion, both below the upper limit approved by the National People’s Congress, the highest organ of state power in China, per the report. 

Put together, the total balance of national debt was CNY70.77 trillion, equaling 56 percent of the country’s gross domestic product, within the internationally accepted standard of a maximum of 60 percent, and lower than that of several major and emerging economies.

Editor: Emmi Laine