China will target a higher budget deficit this year of more than one trillion yuan (S$205 billion), a senior lawmaker said yesterday.

Yin Zhongqinq, deputy head of the financial and economic committee of the National People’s Congress, China’s largely ceremonial parliament, also said that Beijing would again permit provincail governments to issue their own bonds this year.

The sum would be similar to the 200 billion yuan issued in 2009, Mr Yin told a forum.

China undershot its 2009 budget deficit target of 950 billion yuan.  The actual shortfall was about 740 billion yuan, or about 2.2 per cent of gross domestic product, according to Ministry of Finance figures.

“The fiscal deficit this year will be larger than last year, and will probably exceed one trillion yuan.”

Turning to the yuan, mr Yin said that China needed to change expections that the currency can head only higher.  He did not say how this could be done.

“So many years of one-way upward expectations have set China in a dilema in its foreign exchange policy, with very limited flexibility.” Mr Yin said.

Beijing has in effect re-pegged the yuan around 6.83 per US dollar since mid-2008 when the global financial crisis intensified.

The Business Times – 3rd March 2010

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