Fiscal gap widens as economy slows down

For the remainder of this year, Lou vowed to maintain expenditure in sectors involving living standards, while pursuing reform in the public finance sector.

He signaled that the reform of the consumption tax is in sight, calling for the expansion of items subject to the consumption tax by including resource-intensive, polluting products and high-end consumer goods.

Feng Qiaobin, a professor of public finance at the Chinese Academy of Governance, said expanding the scope of the consumption tax has long been discussed. Policymakers have been considering changing the tax, previously collected solely by central governments and mostly levied on producers, to become a local-government tax levied on the consumer.

Other issues include expanding VAT coverage to the rail, postal and telecommunication sectors. At present, VAT is levied on all modes of transportation except railways and the modern service sectors, which include such activities as consulting.

The resource tax on coal, which has been levied on a volume basis, will be calculated on a price basis, according to Lou.

At the same meeting, Xu Shaoshi, chairman of the National Development and Reform Commission, China's top economic planner, also mentioned the fiscal gap. While revenue grew 8 percent in the first seven months, expenditure rose 8.9 percent.

Other problems identified by Xu include "rising potential risks" in the financial sector, the "large pressure" of the housing price rebound and job stability in certain industries.

Xu also announced that in the first seven months, 8.44 million new jobs were created, up from 7.25 million in the first half of the year.

Zeng Xiangquan, dean of the School of Labor and Human Resources at the Renmin University of China, said although the current job market is "not bad", the situation in particular industries such as restaurants was tough. A mismatch of job seekers' skills and employers' demands persists, Zeng said.