BEIJING (Reuters) -China should set its 2024 fiscal deficit and special local government bonds at appropriate levels and optimise the structure of fiscal spending, a senior Communist Party official said on Wednesday, according to state media CCTV.
The comments came after an agenda-setting meeting which concluded on Tuesday, where top leaders pledged to step up policy adjustments to support an economic recovery in 2024.
However, blue-chip stocks on Wednesday fell nearly 0.5% while Hong Kong's Hang Seng index slid 0.8%, as investors continued to look for clues on further policy support from Beijing.
Han Wenxiu, deputy head of the Communist Party's office for financial and economic affairs, said at an economic forum on Wednesday that China should keep consumer prices at a moderate and appropriate level.
"The price level is a macroeconomic thermometer - neither too high nor too low is good," CCTV cited Han as saying.
Han said he expected China's consumer price index (CPI) would rise 0.4% this year from a year earlier, according to CCTV.
The world's second-biggest economy is now grappling with deflationary pressure as consumer prices fell the fastest in three years in November due to weak domestic demand.
After a short post-COVID bounce, China's economy has lost steam since the second quarter and is facing multiple headwinds including mounting local government debt, an ailing housing market and tepid demand both at home and abroad.
In a rare mid-year adjustment, China in October raised its 2023 budget deficit target to 3.8% of gross domestic product (GDP) from the original 3%, after it unveiled a plan to issue 1 trillion yuan ($139.23 billion) in sovereign bonds to aid an economic recovery.
"The space for China's macro policy is still sufficient. As the consumer price level is low, the central government's debt level is not high, there is still plenty of room for the fiscal and monetary policies," CCTV cited Han as saying at the forum.
In terms of fiscal policy in 2024, Han said the key was to optimise the structure of fiscal spending and improve the efficiency of fiscal funds utilisation and policy effectiveness, according to CCTV.
China should also coordinate to resolve risks related to the property sector, local government debt and small and medium-sized financial institutions, the report said.
"It is necessary to effectively implement the package of plans to resolve local debt. Areas with low debt risks must promote high-quality development as quickly as possible," CCTV reported, citing Han as saying.
In October, the government passed a bill to allow local governments to frontload part of their 2024 bond quotas but has not yet announced the quotas.
The national bureau of statistics will release major economic indicators for November on Friday, including industrial output, retail sales and jobless rate figures.
($1 = 7.1825 Chinese yuan renminbi)