On Friday, Wang Yiming, a policy adviser to the central bank of China, said that next year, China will be able to raise its budget deficit ratio to support the economic recovery due to the fact the central government still has space to issue more debt.

At the Caixin Summit in Beijing, Wang, a member of the Monetary Policy Committee of the People’s Bank of China (PBOC), said, “In the short term, we need to increase the intensity of fiscal policy. The central government’s leverage ratio is relatively low and there is still a lot of room.”

He noted by raising the budget deficit next year, it will help to drive the nation’s economic recovery.

China lifted its 2023 budget deficit sharply last month, to about 3.8% of gross national product (GDP), from the previous 3%, due to the pending issuance of 1 trillion yuan ($137.14 billion) in sovereign bonds.

Wang said as a result, China would be able to attain slightly above a 5% rate of economic growth this year. The government’s targeted rate of annual growth was set at just about 5% growth for 2023.

Wang noted that weakened external demand had combined with insufficient domestic demand, to increase the overcapacity pressures in the world’s second largest economy this year.