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EconomyChina Economy

China’s fiscal risks ‘extremely severe’, former finance minister warns ahead of key meetings

  • Government revenue expected to remain low in the next five years, with no prospect of spending cuts, Lou Jiwei says
  • Lou accuses the US of transferring its debt burden to the rest of the world

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China is facing severe fiscal risks, a former finance minister has warned. Photo: AP
Orange Wang
China’s fiscal situation is “extremely severe with risks and challenges”, former finance minister Lou Jiwei has warned, citing fallout from aggressive US stimulus policies, the global economic slowdown during the pandemic, an ageing Chinese population and mounting domestic local government debt.

Lou offered his sharp critique in December but the assessment has only been made public more recently, with just days to go now before China’s political elites meet for their annual legislative session to decide the details of economic policy.

Among the big issues will be whether to scale back the fiscal stimulus implemented last year to combat the impact of the coronavirus pandemic, and instead focus on curbing rising debt risks. Beijing is expected to cut back fiscal stimulus even as Washington closes in on approval for an additional US$1.9 trillion in economic stimulus proposed by President Joe Biden.
The fiscal difficulties are not only a near-term or short-term issue, but also will be serious in the medium term
Lou Jiwei

Lou, who served as China’s finance minister from 2013 to 2016, warned that the country’s fiscal revenue was expected to be stuck at “a low level” in the coming five years, with no sign of the government cutting back its spending.

“The fiscal difficulties are not only a near-term or short-term issue, but also will be serious in the medium term,” said Lou, who is known for his outspoken views.

Lou’s remarks were contained in a speech delivered in December but only published in February by a magazine affiliated with the Ministry of Finance.

Lou charged that the United States was monetising its budget deficit to transfer its debt burden to the rest of the world, especially to developing countries like China.

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