China Urges Local Governments to Spend

2014-05-29

China’s Finance Ministry said on Wednesday it has asked local governments to speed up spending on infrastructure and other budgeted investments to give sluggish economic growth a shot in the arm.

Some spending has been relatively slow this year and budgeted funds must reach all local governments by the end of June, the Ministry of Finance said in a statement on its website.

If local governments fail to spend the funds without a good reason by the end of September, Beijing will take the unspent money back, the ministry warned.

“Certain difficulties [in the economy] cannot be underestimated,” the ministry said, pledging to give fiscal spending a larger role in boosting economic growth.

“[Local governments] must speed up spending on infrastructure construction projects and make spending materialize as soon as possible, ” said the statement dated May 21.

Over the first four months of the year, China’s fiscal spending was up 9.6% year over year, down from an increase of 13.6% over the same period last year, data from the finance ministry showed.

Fiscal deposits, or the funds the government keeps in the financial system, were 3.67 trillion yuan ($587.2 billion) at the end of April, up from 3.05 trillion yuan at the end of April 2013, according to central bank data. These data suggest that governments aren’t spending as quickly as last year.

“The move should be able to help growth, because slower growth has been largely the result of the government’s anti-extravagance campaign and slower fiscal spending,” said Zhi Xiaojia, an economist with Bank of America Merrill Lynch.

Under the budget announced in March, spending is supposed to rise 9.5% this year to 15.3 trillion yuan, while revenue is supposed to increase 8% to 13.95 trillion yuan.

The Chinese economy expanded 7.4% in the first quarter of the year, down from a rise of 7.7% last year. The central government has set a growth target of around 7.5% for 2014.

Source from : Dow Jones

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