Bloomberg News

China’s Li Says Fiscal Spending to Rise at Faster Pace in 2012

December 29, 2011

Dec. 28 (Bloomberg) -- Chinese Vice Premier Li Keqiang said central government spending will grow at a faster pace next year as officials seek to spur consumption in the world’s second- biggest economy.

Fiscal policy will be targeted and “flexible,” Li told a meeting chaired by Finance Minister Xie Xuren on Dec. 26, the official Xinhua News Agency reported yesterday. The government aims for an “appropriate” fiscal deficit and issuance of treasury bonds next year, Li said.

Chinese officials are balancing the threat from weakening export demand against the risk that stimulus measures may reinflate property-price bubbles and add to bad-loan risks for banks. The government is still grappling with the aftermath of the record lending that was part of a 2008 stimulus package to fight the global financial crisis.

“It’s not so easy to strike a balance,” said Ken Peng, a Beijing-based economist at BNP Paribas SA. While officials don’t want a repeat of 2008 and 2009, “nobody wants to see a hard landing,” Peng said.

In the first 11 months, fiscal expenditure rose 24.3 percent to 8.9 trillion yuan ($1.4 trillion), according to the Ministry of Finance. Central government spending climbed 2.6 percent, or 11 percent after excluding a reclassification of spending to local authorities, the ministry said this month.

--Victoria Ruan. Editors: Paul Panckhurst, Brendan Murray

To contact Bloomberg News staff on this story: Victoria Ruan in Beijing at vruan1@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst in Hong Kong at ppanckhurst@bloomberg.net


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