China's national debt levels are not worrying, so China can reflate happily - and effectively. Keep buying.   

1. OFFICIAL BUDGET DEFICIT

   According to  this morning's South China Morning Post (SCMP), this year's official budget deficit is set to rise by RMB 560 bn (HK$652.7 bn), from 2015 to RMB 2.18 trn in 2016, or from 2.4% of GDP to 3% of GDP. Within this RMB 560 bn increase, BNP states that RMB 500 will constitute tax cuts and surcharges.

2. ACCRUED DEFICIT UNDER 50% OF GDP

   According to the Ministry of Finance (MoF), local and central government total, i.e. accrued debt equated to just under 50% of GDP at the end of last year. This is far below the average seen in most developed economies.

3. LOCAL GOVERNMENT FINANCE

   According to said SCMP, "... China aims to go far beyond the official budget. It has permitted the issue of a further RMB 400 bn of special local government bods at the provincial-government level. " The same article goes on to state that "... China also relaxed the restriction local government financing vehicles late last year, which were barred from raising money of local government in October, 2014.

4. TOTAL BUDGET DEFICIT

   If you tally this year's on- and off-budget deficits, they amount to RMB 5.98 trn, which equates to about 8% of GDP. That's nearly 3x the size of China's official budget deficit cited in point one above - but still in the "healthy" zone.

5. WHY FISCAL REFLATION WORKS IN CHINA

   Because the population at large are willing to build roads and dig ditches. This is contrary to the developed world, where the white collar labour force would not dream of such backbreaking labour. Instead, such developed countries would have to import labour - and those workers in turn would repatriate their earnings straight back home. All of which considerably would dilute the multiplier effects of fiscal stimulus.

6. INVESTMENT IMPLICATION

   Thus, keep buying China, especially consumer cyclicals and infrastructure-related. China's Economic Time® is just fine. Also: as we have a biu pm.