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China's budget deficit target raised slightly to 2.1%

Published on Mar 5, 2014 12:02 PM

China will continue to keep a prudent monetary policy while inching up the budget deficit target slightly higher to 2.1 per cent from 2 per cent last year, Premier Li Keqiang said this morning at the opening of the annual session of the National People's Congress (NPC), China's Parliament.

Beijing is set to tighten credit this year to keep the financial system stable and ward off risks of defaults in the vast shadow banking sector, which comprise non-bank players such as trusts, wealth management products and underground lenders.

This follows a 10 trillion yuan stimulus lending binge by banks and other players during the 2008 global financial crisis. 

Fast credit growth persisted in subsequent years, sparking overheating in property prices and a burgeoning debt burden for local governments, whose splurging on stimulus projects drove up their total borrowings to nearly 18 trillion yuan last year. This figure does not include provincial governments' borrowings from the shadow banking sector.

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