China cranked up its fiscal spending by 26% in August from a year earlier as Beijing tries to re-energise flagging economic growth and convince reluctant local officials to spend.
August data over the past week suggested the world’s second-largest economy lost further momentum over the summer, adding pressure on policymakers to ramp up what is already their biggest stimulus campaign since the global financial crisis.
The spending increase to 1.28tn yuan ($201bn) last month was the biggest percentage rise in central and local government fiscal expenditure since April, when it leapt 33%, data from the Ministry of Finance showed on Tuesday.
For the first eight months of the year, fiscal expenditure rose 14.8% over 10tn yuan ($1.57tn) compared with the same period last year.
Still, some economists say the government’s full-year economic growth target of 7% is now at risk, while others fear real growth is already much weaker than official data suggest.
With traditional monetary policy responses such as interest rate cuts having less impact in reviving economic activity than in the past, China is trying to increase fiscal stimulus to both shore up short-term growth and fend off growing deflationary pressures.
“Given China’s top policymakers have given green light to re-leverage the economy on the back of supportive fiscal policy and easing monetary policy, we expect China’s fixed asset investment growth to find a bottom soon,” economists at OCBC wrote in a note.
