China’s slowing economic growth and potential headwinds may suggest fiscal loosening is imminent
- Analysts say weak retail consumption, slowing exports and hardships facing small and medium-sized businesses all suggest government spending needs to rise
- China’s finance ministry has so far remained tight-lipped on further fiscal loosening, instead vowing to address fiscal sustainability
China’s slowing investment approvals and lower-than-expected pace of government spending have fuelled debate over whether the country should be ramping up fiscal spending, particularly as economic growth looks to wane in the coming years.
In the first six months of this year, China’s fiscal expenditure rose 4.5 per cent from a year earlier to 12.2 trillion yuan (US$1.88 trillion), accounting for 49 per cent of the annual budgeted total. In comparison, revenue, which rose 21.5 per cent, already reached 59 per cent of the year’s budgeted income, data from the Ministry of Finance showed on Tuesday.
Meanwhile, only 1.01 trillion yuan worth of special-purpose government bonds were sold in the January-June period, or 28 per cent of the full-year expected total, according to data compiled by debt-clearing house ChinaBond.
The fiscal consolidation was accompanied by slower project approval and infrastructure investment.