The deficit rate is an important indicator of the orientation and strength of fiscal policy. According to the "Government Work Report", the deficit rate is planned to be set at 3% this year, which is 0.2 percentage points higher than last year. What are the policy considerations behind the slight increase in the fiscal deficit rate? In recent years, fiscal policy has played a prominent role in stabilizing the economy. During the deployment of this year's macro policies, the Central Economic Work Conference emphasized that positive fiscal policies should be strengthened and improved. Addressing a series of risks and challenges, especially the problem of insufficient domestic demand, and promoting steady economic recovery and development, also requires further efforts from macroeconomic policies. It has been decided that this year, not only should we continue to implement proactive fiscal policies, but also we should "increase our efforts to improve efficiency.". Among them, how to "afterburner" is particularly interesting. Fiscal policy mainly carries out macroeconomic regulation and control of economic operation through two measures, namely, expenditure and taxation. This year, China will further improve its tax and fee preferential policies to highlight accuracy. The main focus of "Afterburner" is to expand the scale of fiscal expenditure and maintain the necessary expenditure intensity. Expenditure exceeds income, creating a deficit. Raising the deficit rate is an important way for fiscal policy to generate momentum. The level at which the deficit rate is determined directly reflects the expansion of fiscal policy. Raising the deficit rate to 3% this year will help boost market confidence. The deficit rate is the ratio of the deficit size of a year to the gross national product, and the deficit size is determined by the deficit rate and the economic aggregate. With the steady recovery and development of China's economy, the gross national product (GDP) has increased, and the effect of increasing the deficit rate has become more evident. This year, the deficit rate is set at 3%, and the scale of the deficit reaches 3.88 trillion yuan, an increase of 510 billion yuan compared to 2022. An increase of over 500 billion yuan is a necessary supplement to the "tight balance" of financial resources. According to the budget arrangement, this year's national general public budget expenditure exceeded 27.5 trillion yuan, an increase of 5.6%, maintaining a significant level of expenditure. By expanding government spending in key areas, we can effectively stimulate investment and consumption, and ensure the improvement of people's livelihood. At the same time, the determination of the 3% deficit rate takes into account the issues of fiscal sustainability and debt risk prevention. Internationally, "3%" is regarded as the "warning line" for the deficit rate. Although this standard is only a reference value, there is no doubt that it must be taken seriously to prudently control the level of the deficit rate and maintain the risk bottom line. An excessively high deficit rate is tantamount to "living beyond one's means". China has determined a reasonable deficit rate level based on the needs of economic and social development, fiscal policy orientation, and the overall deficit rate has been controlled within 3% in the past five years. The intention of this arrangement is to maintain a certain expenditure intensity while ensuring effective control of debt risk. This year's slight increase in the deficit rate rather than a significant increase reflects both "afterburner" and full consideration of risk prevention, leaving policy space for addressing unexpected and unexpected difficult challenges. It can be said that it embodies the general tone of seeking progress while maintaining stability, balancing development and security, and taking into account needs and possibilities, current and long-term. Although China's debt risk is generally controllable, the prevention and resolution of debt risk, especially local government debt risk, cannot be relaxed for a moment. Among local government debt, general debt is included in the deficit, and special debt is not included in the deficit. In recent years, the scale of special bond issuance has increased rapidly, which is also an important aspect of local government debt
Edit：Hou Wenzhe Responsible editor：WeiZe
Source：economic dairy
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