China's government failed to meet its spending target for last year, as the housing market slump left local governments strapped for cash and unable to meet funding commitments.
Total augmented spending was 38.6 trillion yuan ($5.3 trillion) for 2024, according to a statement from the Ministry of Finance on Friday. That's 5% less than what was budgeted in March.
Increased public spending is key to China's economic recovery since private investment and consumption demand remains sluggish. But local authorities are struggling to keep up due to plunging land sale revenue and tighter borrowing rules imposed by Beijing to rein in debt risks.
The latest data show that fiscal policy failed to provide an adequate boost to the economy last year. Actual spending by central and local governments under their two main budgets—which include everything from infrastructure projects to civil servants' salaries—was less than 1% higher than the level in 2023, missing the targeted spending increase.
Augmented fiscal revenue was 28.2 trillion yuan for last year, resulting in a deficit of 10.4 trillion yuan, equivalent to 7.7% of gross domestic product, according to Bloomberg calculations based on official data.
New housing construction has been dropping for years and slashing demand for land. That's made developers reluctant to purchase sites, choking off a key source of income for local governments at a time when they are collecting less tax from struggling companies.
Cities, towns and villages across the country have struggled to pay wages and to spend as much as was budgeted, undercutting support for an economy that was already under pressure because of a lack of private demand.
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