BEIJING: China’s economic slowdown is putting the spotlight back on fiscal stimulus – but Beijing isn’t opening the spending taps just yet.

       While the US government is pushing to raise its debt ceiling and countries elsewhere keep fiscal policy loose to support their pandemic-hit economies, China could be on track for a much smaller budget deficit than targeted, or even its first balanced budget in about four decades.

       The pullback wasn’t a big problem earlier in the year, when the economy was rebounding strongly, but with the economy now being hit from several sides, the lack of fiscal support has become a glaring issue.

       Tighter fiscal policy is partly driven by Beijing’s push to cut wasteful spending and reduce debt among local governments in order to lower financial risks across the economy. On top of that, stress in the property market is curbing land sales – a key source of income for local governments, who are already facing revenue pressure from a slowing economy.

       Spending by the national and local governments was about 21.5 trillion yuan (US$3.3 trillion or RM14 trillion) through the end of August, according to Ministry of Finance data, representing only about 56% of the target for the whole of this year, and unchanged from the same point last year.

       The government forecast the deficit would shrink slightly this year to 3.6 trillion yuan (RM2 trillion), claiming in March that this showed China was “pursuing high-quality development rather than adopting a deluge of strong stimulus.”

       The deficit target was decided at the start of the year when the economy was growing at close to its potential rate and it was appropriate for authorities to consider normalising policy at the time, said Ding Shuang, chief China economist at Standard Chartered Plc.

       “But what happened next was not expected by policymakers at the time, from the regulatory tightening to property curbs and natural disasters,” he said.

       “Fiscal policy will become stronger in the coming months but it’s not like you can just make the instruction today and have the money spent overnight.”

       When removing special local bonds and money carried over from last year, the budget deficit in the first eight months was only one trillion yuan (RM645bil), according to Bloomberg calculations, compared with a target for the whole year of almost nine trillion yuan (RM6 trillion). — Bloomberg