A clerk counts cash at a bank in Huaibei, Anhui province. [Photo provided to China Daily]

To counter the economic shocks caused by the novel coronavirus outbreak, China will rely on extensive fiscal measures and maintain a flexible stance on monetary policy, according to signals in the Government Work Report and the annual fiscal budget arrangement.

The Government Work Report, delivered by Premier Li Keqiang to the third session of the 13th National People's Congress on Friday, said the government set the deficit-to-GDP ratio at "3.6 percent or higher this year", with the deficit 1 trillion yuan ($140 billion) more than last year.

In addition, 1 trillion yuan of central government special bonds will be issued to fund coronavirus control measures.

All proceeds of the special bond issuance and the rise in the fiscal deficit, totaling 2 trillion yuan, will be transferred to local governments, the report said.

It highlighted fiscal support for the economy, despite setting no GDP growth target, as the pandemic disrupts activity via a combination of domestic and external shocks.

The fiscal deficit ratio was set higher than the 2019 target of 2.8 percent.

Analysts said the phrase "or higher", used in the report, is a new expression that may indicate a willingness to raise the level later if necessary.

Lu Ting, chief economist in China with Nomura Securities, said Beijing is relying on demand stimulus, focusing mainly on infrastructure investment, to counter the effect of the coronavirus, which has delivered the worst blow to the economy since the late 1970s.

Martin Petch, a vice-president and senior credit officer at Moody's Investors Service, said the expansion of infrastructure investment in a slow growth environment may raise public sector debt, which must balance short-term economic support with the longer-term objective of stability.

Effie Xin, managing partner of financial services Greater China at EY, said China faces downward pressure on economic growth as structural and cyclical factors constrain prospects. In addition, the coronavirus outbreak has had an adverse impact on economic activity, both in China and globally.

"To address the impact, larger than expected stimulus policies introduced across economies will likely change the international economic and trading landscape to a certain extent, posing considerable uncertainty to the global economy and exposing listed banks to new difficulties and challenges in business operations and development," she said.