China speeds up spending to counter Trump tariffs

China expanded government spending at the fastest rate for any first quarter since 2022, ramping up support for an economy bracing for foreign demand declines as a trade war with the US intensifies.By Bloomberg  April 19, 2025, 9:52:46 AM IST (Published)1 / 7The combined expenditure in the general public budget and the government fund account, China’s two main fiscal books, rose to 9.26 trillion yuan ($1.3 trillion) in the first three months, an increase of 5.6% from the same period a year earlier, according to Bloomberg calculations based on data released by the Ministry of Finance on Friday. That was the strongest gain for the first quarter in three years.2 / 7The numbers meant nearly 22% of the outlays planned for the full year was spent in the period, faster than 21.6% at the same point last year. China has to strengthen public spending to shield the economy as surging American tariffs could send its exports into contraction while a years-long housing market downturn and deflation keep consumer and business sentiment weak. Its growth held up in January-March, but economists broadly expect it to slow sharply from the second quarter after the wave of export front-loading passes and benefits from a consumer trade-in program taper off. File photo: Chinese President Xi Jinping arrives at the Great Hall of the People on the day of the opening session of the National People’s Congress (NPC), in Beijing, China March 5, 2025. REUTERS/Tingshu Wang3 / 7Several major banks have downgraded their forecast on China’s expansion this year to 4% or lower, well below the government’s goal of around 5%. Officials are focusing on implementing supportive measures announced at last month’s parliamentary session, although they also said they have ample scope and tools to add stimulus when necessary.4 / 7Faster tax rebate payouts have been cited by some analysts as an option to help offset some squeeze posed by US tariffs on exporters. The payout as a share of exports last month came in at 11%, only up slightly from the level a year earlier, according to Bloomberg calculations based on official data. Image source: Bloomberg5 / 7The property downturn remained a drag on government income last month, with land sales shrinking 16.5% on year and real estate-related revenues falling 0.1%.6 / 7Tax revenue declined on year for a second straight month while the increase in non-tax income almost halved. Local authorities rushed to sell bonds to swap the so-called “hidden debt” onto their books in a program aimed at alleviating their cash strains and reducing excessive fines imposed on businesses, which are a source of non-tax income.7 / 7The continued contraction in land sales and tax revenues meant total income under the two major budgets fell 2.6% on year to 6.94 trillion yuan in the first quarter. The gap between government income and spending broadened as a result, with the broad budget deficit soaring 41% on year to 2.3 trillion yuan.Continue Reading

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