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China fiscal policy has 'ample room' to support economy: c.bank research head

Reuters  |  BEIJING 

(Reuters) - China's fiscal policy has "ample room" to support the economy, the central bank's said in an opinion column on Friday, adding that the policy has not been active enough.

China's budget deficit goal this year of 2.6 percent indicates a contractionary fiscal policy and this year's actual deficit ratio should be higher than last year's 3 percent, Xu Zhong, the at of (PBOC), wrote for the

Chinese officials have long stated would maintain a proactive fiscal policy.

The government should use fiscal funds to replenish the capital of state-owned financial institutions and ease the strain in financial market deleveraging, Xu wrote.

The latest comments by Xu echo those from economists that could deploy a much more active fiscal policy and fine-tune its monetary policy to shore up growth amid a slowdown in the world's second-biggest as it extends a prolonged crackdown on financial risks and battles a heated trade war with the

"China's fiscal policy cannot be active if it still keeps a lid on local government debt," wrote Xu.

Chinese regulators are in the third year of a campaign to clamp down on riskier lending practices. The has been a particular headache, being a source of off-balance sheet loans for local governments and their financing vehicles (LGFVs).

Local governments have been banned from providing implicit guarantee to LGFVs and some have halted several infrastructure projects.

Xu said that some local governments still have room for "leveraging" and could play a key part in ensuring a stable growth rate for the

Policymakers have been trying to strike a delicate balance between the need for tougher supervision and reforms and ensuring the stability of the financial system, while keeping economic growth on track.

Analysts in a poll have raised their 2018 growth forecasts for China's to 6.6 percent, up from an April forecast of 6.5 percent - a surprising result given an escalating trade war with the United States, as they see a deleveraging drive and pollution crackdown having less of an impact than initially expected.

(Reporting by and Monitoring Desk; Editing by Jacqueline Wong)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, July 13 2018. 15:51 IST
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