China tells local governments to use unspent money

[BEIJING] Chinese central and local government departments must reallocate unspent money from fiscal 2012 and before to new budgets, the country's cabinet said on Wednesday.

There was no detail on how much money would be reallocated, but the move followed data on Tuesday that showed growth in China's economy hitting a 24-year low last year as investment slowed and the housing and manufacturing sectors cooled.

China has re-worked public budgets in the past to increase government spending and lift the economy.

In May 2014, Beijing ordered local governments to finish allocating their annual budgets for the year by June or risk the money being called back by the central government.

Getting governments to sharply increase spending helped China to quickly rebound from the 2008/09 global financial crisis. But the 4 trillion yuan (US$644 billion) spending spree also left Chinese governments with a pile of debt that remains a headache even today.

The new rules will help to curb embezzlement of state revenue, ensure budget stability and encourage economic growth, said the notice, dated Dec. 30, but reported on the government's website on Wednesday.

China urgently needs fiscal reforms to improve budget management and let the central government reassume more spending obligations, reducing the need for local governments to borrow heavily or to sell land to raise revenues for key social services.

To support reforms to the budgeting system, China's parliament approved changes to the Budget Law earlier this year, allowing local governments to issue bonds directly for the first time.

REUTERS