China's deficit smaller than government forecast
2014-01-24 12:19:31
China's fiscal deficit for 2013 came in below the government's budget projections, reflecting less aggressive spending on some social programs and better-than-expected revenue despite slower economic growth.
The figures suggest China has plenty of firepower to ratchet up spending if the economy slows considerably. Last year, economic growth came in at 7.7%, though the economy struggled somewhat in the first half of the year, hitting a low-point of 7.5% growth in the second quarter.
A brief ministimulus policy of spending on rail and subways as well as business tax breaks helped push growth higher in the second half.
The deficit came in at 1.06 trillion yuan ($174 billion), about 1.86% of gross domestic product last year, according to calculations by The Wall Street Journal based on government data. China had projected a fiscal deficit of 1.2 trillion yuan, or about 2% of gross domestic product, in its budget.
"The central government's revenue growth began to pick up in the second half of the year as economic growth gradually warmed up and trade conditions improved," the finance ministry said on its website Thursday.
In 2012, it had a final deficit of 800 billion in 2012, including the effects of special transfers from a budget stabilization fund that essentially serves as a pool of rainy-day money.
For 2013, fiscal revenue reached 12.91 trillion yuan, up 10.1% and outpacing budget projections of an 8% rise. Fiscal spending totaled 13.97 trillion yuan, up 10.9%, slightly topping the 10% rise included in the budget, according to the Ministry of Finance.
"I think that under the difficult circumstances, this was a fairly positive result," said Jia Kang, a senior researcher with the ministry.
Tax revenue grew 9.8% from a year earlier to 11.05 trillion yuan in 2013, slower than an increase of 12.1% in 2012, while nontax revenue, including fees collected by the government, climbed 12.1% to 1.86 trillion yuan, compared with growth of 17.5% in 2012.
Education was one area where the government chose to curb spending. Expenditures rose a modest 3%, far below the 28.3% increase in 2012. Spending on public housing was 1% lower than in 2012 despite numerous government statements on the importance of providing affordable homes for the less affluent. Spending on lower cost housing climbed 16.4% in 2012.
"Spending growth in some areas of social welfare has slipped notably," said Gong Min, an economics professor at Xiamen University. "Social welfare benefits are the first thing to be cut when economic growth starts to falter."
Beijing boosted its spending on medical care by 13.3%--higher than the 12% increase in 2012—while spending on employment-related benefits climbed 14.6% against 12.9% in 2012.
The government has been actively stressing the need to create enough new jobs to absorb the new entrants into the workforce and in turn ensure social stability.
The government, which has been insisting it was maintaining a "proactive" fiscal policy, pushed up spending at the tail end of the year after keeping a slightly tighter grip on its purse strings earlier in 2013. Spending reached 2.5 trillion yuan in December alone, up from 1.27 trillion yuan in November and 2.08 trillion yuan in December 2012, official data showed.
"The so-called proactive fiscal policy was actually not so growth-supportive over much of the year," said Feng Jianlin, an economist with the Beijing Fost Economic Consulting Co.
The finance ministry also said that its revenue and spending figures are subject to revision. The figures don't include funds added to or withdrawn from the central budget stabilization fund and this item is expected to be announced at the annual session of parliament in March.