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In view of analysts at Standard Chartered, China’s 2019 budget is more expansionary than indicated by the headlines, as the general public budget deficit of 2.8% of GDP is misleading, in their view, due to its narrow focus and methodological issue.

Key Quotes

“The broad deficit measure, combining the general public budget and local special bond issuance quota, points to a much higher budget deficit of 5.0% of GDP. Our preferred deficit measure, based on widely accepted fiscal accounting, puts the 2019 budget deficit at 6.5% of GDP, compared with a budget deficit of 4.6% and actual deficit of 4.7% of GDP in 2018.”

“We see our preferred deficit measure as a better reflection of the overall fiscal stance.”

“We believe the 2019 budget leaves ample fiscal room to achieve the growth target. The fiscal stimulus of nearly 2% of GDP, supported by credit growth in line with nominal GDP, appears more than sufficient to deliver growth of 6.0-6.5% in the absence of a trade war with the US.”