On March 5, China announced a fiscal deficit budget of RMB 950 billion (approx. $140 billion) for 2009 at the second session of the 11th National People's Congress, the highest in the country's history, as China boosts spending to cushion the impact of the global financial crisis. Even in 1998 when the country was seriously threatened by the Asian financial crisis, the government still controlled its deficit in the range of RMB 200-300 billion ($30-45 billion).
According to the text of a report of Chinese Premier Wen Jiabao distributed to the media, China set this year's central government deficit at RMB 750 billion ($110 billion), RMB 570 billion ($83 billion) more than last year. The total RMB 950 billion deficit budget was nearly three times over the last record of RMB 319.8 billion ($46.75 billion) set in 2003. The surging deficit is part of China's proactive fiscal policy, which was adopted in November in a response to economic slowdown and diminishing jobs under the pressure of the world financial turmoil. "We will significantly increase government spending. This is the most active, direct and efficient way we can expand domestic demand." said Wen Jiabao.
A country's fiscal conditions will be viewed as risky if the deficit accounts for more than 3 percent of GDP or the outstanding government bonds exceed 60 percent of GDP, according to the usual international practice, while RMB 950 billion accounts for less than 3 percent of China's gross domestic product (GDP). And it was added that the government still has room to do that and it could be necessary to spend even more if China's economic growth further weakens in the second quarter of this year.