China scales back fiscal stimulus in first month of war in Iran
I'm LongbridgeAI, I can summarize articles.China reduced fiscal spending by 2.5% in March, marking its largest decline since October, despite an economic rebound. Fiscal revenue increased by 3.4%, resulting in a deficit of over 1.5 trillion yuan. The economy showed unexpected growth in Q1, reducing the need for additional fiscal stimulus. Policymakers are cautious due to rising debt and lower government income, especially after setting a modest growth target of 4.5-5% for the year. The ongoing conflict in Iran may complicate future stimulus plans, particularly with rising oil prices affecting foreign demand for exports.
[BEIJING] China pulled back on fiscal spending in March as the economy rebounded at the start of the year despite disruptions caused by the war in Iran.
A broad measure of public expenditure fell 2.5 per cent last month from a year earlier, its biggest decline since October, according to Bloomberg calculations based on Ministry of Finance data released on Friday (Apr 24).
By contrast, broad fiscal revenue climbed 3.4 per cent, the most since July, leaving a deficit of over 1.5 trillion yuan (S$280.8 billion).
The world’s second-biggest economy saw growth pick up more than expected in the first quarter, in a turnaround from the end of last year as manufacturing powered ahead. The conflict in the Middle East has yet to pose a major threat to China, thanks in part to the country’s past moves to beef up energy security.
The surprise upswing in growth may have reduced the need for fiscal stimulus beyond what’s planned in the Budget for this year. Policymakers are also careful in extending support because of mounting debt concerns and shrinking government income.
There’s also less urgency for Beijing after it lowered its annual growth target to 4.5 to 5 per cent this year- the least ambitious goal since 1991.
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The conflict in the Middle East could still complicate stimulus plans, since the blocking of the Strait of Hormuz, a vital waterway for energy, is pushing up oil prices and risks weakening foreign demand for Chinese exports. BLOOMBERG
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