According to The Paper, China’s Politburo held a meeting on March 27. For the first time, it proposed to “appropriately raise the fiscal deficit rate and issue special government bonds” to deal with the impact of the epidemic on the economy. A number of economists recommended a deficit rate of 3.5 percent versus 2.8 percent in 2019. It would bring in 700 billion yuan (US$99 billion). Meanwhile they also recommended issuing a special government bond of no less than 1 trillion yuan (US$140 Billion). Moreover, they reiterated that the local government could increase the scale of their special debt limit from 2.15 trillion yuan (US$300 billion) for 2019. If the deficit rate for 2020 were to increase to 3-4 percent, it would mean that the local government debit limit could go up to 4 trillion yuan (US$560 billion).
Source: The Paper, March 27, 2020