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May 29, 2020

Covid-19 pandemic may increase China’s deficit to historic high

By Paul Dennis

29 May

Economies across the world have announced stimulus packages to deal with the impact caused by the Covid-19 pandemic. Although these packages are essential, they are not reaching the people who need it the most and increasing the deficit-to-GDP ratio.

Adam Posen, president of the Peterson Institute for International Economics, shared a tweet on China’s deficit-to-GDP ratio. The article notes that China had a policy of placing a 3% ceiling on its deficit-to-GDP ratio.

The Covid-19 pandemic has broken this ceiling with the ratio exceeding 3.6% of GDP. The pandemic has added RMB1tn ($140.2bn) to the government’s deficit spending.

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