CRI听力:Deficit Increase, Local Gov't Debt Control Highlighted in Finance and Tax Reform

Lou Jiwei said China is expanding deficit spending to prevent a slide in growth and support its efforts to overhaul its cooling economy.

"What I mean is that our fiscal income is in a severe situation. We need to expand the fiscal deficit, and secondly, it is hard to say how much room is appropriate. We have certain room, but cannot grow too much, because our fiscal income accounts for only around 30 percent of GDP. As I said just now, China's government debt is not so high, around 40 percent, including both central and local government levels."

Luo says the deficit target of 3 percent of gross domestic product, up from last year's 2.4 percent, was in line with plans to nurture slower, more self-sustaining growth.

Lou has promised that authorities will optimize spending structures, ensuring major spending on people's wellbeing and public services, while cutting some items for officials and public servants.

"We will strictly control or even cut the three kinds of spending on buying vehicles for official use, the government operational fees and the reception fees by public servants so as to make sure that more money is spent on fundamental public services and the key areas of people's livelihood."

Lou adds that while there is not a real problem with China's central government debt, its key task is to control local government debt risk in 2016.

"The key is whether the local governments will generate more debts than the amount stipulated in the Budget Law. In that case, our debt risks would mount. Fiscal authorities at all levels will work to strengthen the debt management this year and we believe our efforts will pay off."

In response to the worries about the worsening operating conditions of state-owned banks, Lou said though the number of China's bad loans to banks is rising, it is doing so mildly.

He pointed out that the market mechanism and government assistance are both the keys to address this issue.

"One key is the market mechanism. Each party must observe the contract principles and market rules. The other is the assistance given by the government, adding some leverages, to help key and institutionally strong financial institutions in order to enable them to prevent serious problems from happening."

But Lou denied that government support would constitute special treatment for banks in which the government is a major shareholder.

The finance minister also says China has completed a reform plan on individual income tax and that it will be submitted to the national legislature for review this year.

He says the amendment is not just about thresholds, but considers overall income and spending, such as housing mortgages, expenditure on education, children' schooling and elderly care.

In 2011, China's top legislature adopted an amendment to the individual income tax law, raising the monthly tax exemption threshold from 2,000 yuan, or about 307 U.S. dollars, to 3,500 yuan or some 570 USD.

For CRI, this is Qi Zhi.