China Deepens Fiscal Austerity
According to Sedaye Sama News, Bloomberg’s calculations based on data from China’s Ministry of Finance show that total government spending fell by 11.9% in June compared with the same month last year, while overall fiscal revenue increased by 1.8%.
As a result, China’s overall fiscal deficit in the first half of the year reached 4.57 trillion yuan, down 13% from the previous year.
The prolonged fiscal tightening has weighed on overall investment, contributing to weaker-than-expected economic growth in the second quarter. However, senior Chinese officials have called for faster implementation of previously approved pro-growth policies to achieve Beijing’s annual economic growth target of 4.5% to 5%. The government has also pledged to accelerate construction of the massive “Six Networks” initiative, a national infrastructure strategy that includes data centers, power grids, and telecommunications networks aimed at supporting long-term growth in the era of artificial intelligence.
Earlier, Chinese Premier Li Qiang pledged to make full use of existing policy tools and consider additional measures to counter the economic slowdown.
Meanwhile, local governments are stepping up fundraising for capital investment. According to Bloomberg, local authorities issued 291.7 billion yuan in bonds in June, primarily for infrastructure projects. Although this was the highest monthly issuance since February and more than double the previous month’s level, it remained slightly below the level recorded a year earlier.
This trend is expected to continue, as provincial governments still have nearly 1.9 trillion yuan in bond issuance quotas available for this year. Separately, the central government has allocated 800 billion yuan in new policy financing instruments to support investment projects, with large-scale implementation expected to begin in the third quarter, according to the state-run Securities Times.
