China Aug fiscal spending jumps 25.9% as Beijing looks to spark economy

[BEIJING] China's fiscal spending jumped 25.9 per cent in August from a year earlier as Beijing tries to re-energise flagging economic growth.

That was biggest rise since April, when spending leapt 33 per cent, data from the Ministry of Finance showed on Tuesday.

For the first eight months of the year, fiscal expenditure is now up 14.8 per cent over 10 trillion yuan (S$2.2 trillion) compared with the same period last year.

With traditional monetary responses such as interest rate cuts having less impact on economic activity than in the past, China is trying to increase fiscal stimulus to both shore up short-term growth and defend against deflationary pressures.

Spending on education rose 15.8 per cent in Jan-Aug; healthcare 19.5 per cent; energy conversation and clean technology 22.7 per cent; and social security and employment 21.7 per cent.

However, China's clunky budget process, and at times strained relationships with some local government officials, appear to be still complicating the transmission process in terms of turning higher spending into actual actiovity.

Angry Chinese authorities have seized up to 1 trillion yuan from local governments who failed to use their budget allocations, Reuters reported on Monday, quoting sources.

The huge underspend, linked to officials' reluctance to splash out on big-ticket projects while authorities crack down on corruption, supports the argument of some economists that Chinese state investment has grown too slowly this year.

Fiscal revenues rose 6.2 per cent in August from a year earlier and are now up 7.4 per cent for the first eight months from a year earlier, according to the data.

Unsteady domestic and global demand, a wobbly housing market and cooling investment are expected to drag China's official full-year growth to 7 per cent in 2015, the lowest in a quarter of a century, though some analysts suspect real growth levels are already much lower.

A near 40 per cent drop in China's stock market in the summer and a shock near-2 per cent devaluation in the yuan in mid-August have added to concerns about the health of the economy, roiling global financial markets.

In another sign China is prepared to crank up fiscal stimulus, the powerful economic planner, the National Development and Reform Commission (NDRC), held an internal teleconference on Monday to discuss the ways to stabilise investment growth.

Measures to be taken include dispensing a second round of financing for construction projects by September, and ensuring that funding for projects paid for by the central government will be ready in the next two weeks.

REUTERS