BEIJING: China has pulled back on fiscal spending in March as the economy rebounded at the start of the year despite disruptions caused by the war in Iran.
A broad measure of public expenditure fell 2.5% last month from a year earlier, its biggest decline since October, according to Bloomberg calculations based on Finance Ministry data released last Friday.
By contrast, broad fiscal revenue climbed 3.4%, the most since July, leaving a deficit of over 1.5 trillion yuan.
The world’s second-biggest economy saw growth pick up more than expected in the first quarter, in a turnaround from the end of last year as manufacturing powered ahead.
The conflict in the Middle East has yet to pose a major threat to China, thanks in part to the country’s past moves to beef up energy security.
The surprise upswing in growth may have reduced the need for fiscal stimulus beyond what’s planned in the budget for this year.
Policymakers are also careful in extending support because of mounting debt concerns and shrinking government income.
And there’s less urgency for Beijing after it lowered its annual growth target to 4.5% to 5% this year – the least ambitious goal since 1991.
“The priority is to fully implement the policies already in place,” Yang Zhiyong, director of the government-backed Chinese Academy of Fiscal Sciences, told Bloomberg.
Additionally, infrastructure- related expenditure under China’s main budget dropped 8.5% in March from a year earlier after increasing in the previous month, according to Bloomberg calculations.
The pullback was more significant than the slowdown in infrastructure investment growth, according to Goldman Sachs Group Inc. economists including Lisheng Wang.
That implies “some off-budget government financing channels may have provided support”, they wrote in a note after the data release.
Furthermore, China kept the 2026 government bond quota little changed from last year, as Beijing tries to contain local debt risks after a long borrowing binge.
Meanwhile, it raised the amount of new policy financing tools, a quasi-fiscal instrument, by 60% to 800 billion yuan this year to help drive investment. — Bloomberg
