What Is Public Deficit?

The meaning of the public sector deficit is the difference between the public sector's net expenditures and taxes, and the total expenditures are greater than the net expenditures, which consist of income from the sale of public property, fees and charges.

Public sector deficit

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The meaning of the public sector deficit is the difference between the public sector's net expenditures and taxes, and the total expenditures are greater than the net expenditures, which consist of income from the sale of public property, fees and charges.

The public sector deficit is the difference between net expenditures and taxes, and the total expenditures are greater than the net expenditures that consist of income from sales of public property, fees and charges.

First, the high public sector deficit is "a key factor in creating inflationary pressures in the economy." Macroeconomic fluctuations during the reform period can be partly attributed to the high deficit of the public sector, which caused the money supply to exceed the amount of money needed for real economic growth.

Second, high public sector deficits reduce the savings available for investment in the non-state sector. Because state-owned enterprises account for the vast majority of bank loans, it is almost impossible for non-state-owned enterprises to obtain bank loans directly. Non-state-owned enterprises have to rely on the informal credit market, profit reinvestment and funds provided by state-owned enterprises with which they have close economic ties to support their own development. This means that non-state-owned enterprises have so far only played a supporting role in capital-intensive industries with significant economies of scale. The starting point for this type of industry is too high to exceed the informal credit market and the ability to reinvest profits. And state-owned enterprises are not interested in providing huge indirect financing for such investments that may form new competitors in their core business areas. As a result, unlike the pattern of competition between a large number of non-state-owned enterprises and existing state-owned enterprises in labor-intensive industries, in capital-intensive industries, large state-owned enterprises still dominate the world.

Third, because a considerable portion of state-owned enterprise loans cannot be repaid, public sector deficits have been accumulating for a long time, which has reduced the value of government assets below their expected levels. China's domestic debt, the balance of government bonds, is still very low. But using government bond balances as a proxy for underestimating public sector liabilities. As long as the Chinese government also has many other governments that provide implicit guarantees for the public's savings in banks, then a broader definition of domestic debt, such as including loans that cannot be repaid from state-owned banks, is used to measure the government's internal debt. More suitable.