China will continue to follow a proactive fiscal policy and a prudent monetary policy in 2012, carry out timely and appropriate anticipatory adjustments and fine-tuning, and make policies more targeted, flexible, and forward-looking, Premier Wen Jiabao said Monday.
China will keep the deficit and government debt at “appropriate levels”, Wen said in a government work report delivered at the annual session of the National People’s Congress (NPC), China’s top legislature.
According to the report, the government is projecting a deficit of 800 billion yuan (about 127 billion U.S. dollars), a decrease to around 1.5 percent of gross domestic product (GDP), which consists of 550 billion yuan in central government deficit and 250 billion yuan of bonds issued on behalf of local governments.
Last year, the budgeted deficit was 900 billion yuan.
“We will strengthen supervision of local government debt and guard against risks. We will continue to deal with outstanding debts properly by classifying them into different categories and managing them accordingly, dealing with different situations differently, and resolving problems gradually,” said Wen.
He pledged to further investigate and standardize financing companies run by local governments, saying governments at all levels are prohibited from making guarantees and promises in this respect in violation of laws and regulations.
The central government will strictly limit new local government debt, and place revenue and expenditures of local government debt under budgetary management on the basis of their type, he said.
Wen said China will employ a full range of monetary policy tools, appropriately adjust the supply and demand of money and credit, and maintain proper growth of financing from nongovernmental sources. The broad money supply is projected to increase by 14 percent.
“We aim to promote steady and robust economic development, keep prices stable, and guard against financial risks by keeping the total money and credit supply at an appropriate level,” he said.