BEIJING: China scaled back government spending at its fastest pace in six months in April, a move that contributed to an unexpected slowdown in the economy across the board.
A broad measure of public expenditure fell 7.3% from a year ago, accelerating from the 2.5% decrease in March to mark its sharpest decline since October, according to Bloomberg calculations based on Finance Ministry data released Wednesday.
By contrast, broad fiscal revenue rose 2%.
The data helps explain a surprising contraction in fixed-asset investment that China recorded in April, which followed a rebound earlier this year.
Combined with sluggish consumer spending, the investment downturn outweighed booming exports, dragging down overall economic activity.
Economists have pointed to several reasons for the fiscal pullback.
Solid economic growth in the first quarter may have reduced the impetus for authorities to step up spending.
Furthermore, others noted a potential funding gap in April, as some construction projects were moved from late 2025 to early 2026 while new projects had yet to receive approval.
Officials may also have faced pressure to repay arrears to companies.
Infrastructure-related expenditure under China’s main budget plunged 17.7% in April from a year earlier, worsening from the 8.5% drop in March, according to Bloomberg calculations.
The fiscal “spend-through” ratio, an indicator developed by Goldman Sachs Group Inc to measure how much of the funds raised by the government have actually been spent, dropped to 98.2% in April from 99.1% in March.
“The extent of fiscal policy easing has been scaled back,” Huatai Securities economists, including Wang Mingshuo, wrote in a report yesterday.
“Under the backdrop of an energy shock, some companies’ and consumers’ cash flow may have been hit.
“A continued recovery in domestic demand still requires fiscal support.”
Bloomberg economists Chang Shu and David Qu said April brought a muted initial shock from the Middle East war.
“The domestic economy’s deep imbalance – strong supply, fragile demand – has become more pronounced.
“That points to a sustained easing bias, with further monetary and fiscal stimulus likely later in the year, especially if the conflict drags on.”
The on-year decline in government income from land sales widened in April from March. — Bloomberg
