China will allow more borrowing by local governments as part of a surging fiscal deficit this year, which may be a long-term mechanism to stimulate growth and promote urbanization, experts said.

Government expenditures are projected to exceed revenue by 1.2 trillion yuan ($192.8 billion) in 2013, an increase of 400 billion yuan from last year, according to the annual budget report handed to deputies of the 12th National People's Congress, which opened in Beijing on Tuesday.

The deficit is equivalent to about 2 percent of GDP this year, up from 1.5 percent in 2012, a result of less government revenue and rising public spending.