China’s budget deficit continued to contract so far this year, a sign of weak fiscal support for the economy despite a slowdown in growth.
(Bloomberg) — China’s budget deficit continued to contract so far this year, a sign of weak fiscal support for the economy despite a slowdown in growth.
The broadest measure of the fiscal gap — the so-called augmented deficit — was 4.28 trillion yuan ($590 billion) in the first eight months of this year, down 29% from the same period in 2022, according to Bloomberg calculations based on data released by the Ministry of Finance on Friday.
Total revenue rose 4.4% in the period, while spending fell 4%, the figures showed.
Weak fiscal support has been a key drag on economic growth in the past few months. Bloomberg Economics estimates reduced government spending subtracted 1.2 percentage points from growth in the first seven months of this year.
Cash-strapped local governments have been slow to roll out stimulus, although there are signs spending may pick up in the remaining months of the year. Local authorities are accelerating the sale of new special bonds, mainly used for infrastructure investment, and have been ordered by Finance Minister Liu Kun to use the proceeds by the end of October.
A stronger fiscal push may help to lift growth at the same time the government is easing some property restrictions to spur home sales and the central bank is adding monetary stimulus to the economy. Data released Friday showed the economy could be stabilizing as retail sales and industrial production grew at a faster pace than expected in August.
Budget Revenue
The augmented fiscal deficit is based on a combination of the general budget, which covers mainly everyday spending, and the government fund budget, which is more weighted toward capital investment projects.
Official data showed revenue from the general public budget — which includes taxes and fees — rose 10% in the eight months through August, while spending was up 3.8%. Income from deed taxes, which are paid when a property is bought or sold, rose 3.7%.
Government revenue from selling land-use rights fell 19.6%, after a 19.1% plunge in the first seven months, dragging down fund income.
Note: A positive number for balance means surplus, while a negative figure indicates deficit.
Source: Ministry of Finance
–With assistance from Cynthia Li.
(Updates with additional detail)
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