China’s fiscal revenue growth plummets

Angry Chinese authorities have seized up to 1 trillion yuan ($157 billion) from local governments who failed to use their budget allocations, Reuters reported on Monday, quoting sources.

Fiscal surplus for the January-July period was 383 billion yuan ($60.22 billion), leaving plenty of room for expansionary policies to increase the budget deficit to 2.3 percent of GDP for 2015, up from last year’s 2.1 percent.

Still, some economists say the government’s full-year economic growth target of 7.0 percent is now at risk, while others fear real growth is already much weaker than official data suggest.

China’s government is now targeting economic growth of 7% this year, a figure that many analysts believe may be hard to achieve given a noticeable slowdown in economic activity in recent months.

Factory production and fixed-asset investment in China were both weaker than expected in August, a month when Beijing temporarily closed some factories ahead of a high-profile military parade.

The large amount of unspent allocations is linked to the reluctance of officials to splash out large ticket projects during a time when authorities crack down on widespread corruption, supports an argument by some economists that state investment in China has grown too slowly during the first half of this year.

One trillion yuan of unspent funds is equivalent to about 6 per cent of the mainland’s projected total government spending for the year. Data from the finance ministry also showed that the Chinese government has further sped up its fiscal spending despite slower revenue growth in August.

China’s stock markets have been on a roller-coaster ride since June, falling close to 40 percent and prompting frantic efforts by authorities to restore confidence.

Although growth uncertainties abound at home and overseas, China has plenty of policy options－especially on the fiscal front－to put the economy on track to deliver the around 7 percent annual growth target.

The increase in government spending was broad based.

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.

Data over the weekend pointed to stubborn weakness in China’s economy.

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