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Business Times
20-05-2025
- Business
- Business Times
China ran record budget deficit with spending blitz amid tariffs
CHINA'S fiscal stimulus pushed its four-month budget deficit to a record high, as the government ramped up support for the economy during an escalation in its trade conflict with the US. The broad deficit reached 2.7 trillion yuan (S$484 billion) in January to April, the most ever for the period, according to Bloomberg calculations based on data released by the Finance Ministry on Tuesday (May 20). The shortfall swelled by more than 50 per cent compared with a year earlier. It's the clearest evidence yet that Beijing shifted into a higher gear in deploying this year's planned fiscal stimulus to help the economy weather external shocks. US tariffs on most Chinese goods rose to a prohibitively high level of 145 per cent in April before the two countries agreed to a truce earlier this month. Outlays soared against the backdrop of stabilising earnings. Total income in China's two main fiscal books reached 9.32 trillion yuan in January to April, a decline of only 1.3 per cent year on year after a much steeper drop during the first quarter. Total expenditure rose 7.2 per cent to 12 trillion yuan, the data showed. That number combines spending under the general budget, which includes mainly everyday outlays, with expenditure in the government fund budget, which is more weighted towards capital investment projects. Looking ahead, the urgency of further fiscal support is waning after an agreement by China and the US to temporarily lower tariffs levied against each other's products. The truce, along with decent economic activity numbers for April, has led a few major international banks to raise their forecasts for China's growth this year and dial back expectations of additional stimulus by the government. Tuesday's fiscal figures have given them more reasons to bet on the government delaying new supportive measures. 'Government spending was accelerating while revenue shows signs of stabilisation,' said Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group. 'The need for expanding fiscal deficit in the middle of the year has declined.' BLOOMBERG
Yahoo
20-05-2025
- Business
- Yahoo
China Ran Record Budget Deficit With Spending Blitz Amid Tariffs
(Bloomberg) -- China's fiscal stimulus pushed its four-month budget deficit to a record high, as the government ramped up support for the economy during an escalation in its trade conflict with the US. America, 'Nation of Porches' NJ Transit Train Engineers Strike, Disrupting Travel to NYC NJ Transit Makes Deal With Engineers, Ending Three-Day Strike The broad deficit reached 2.65 trillion yuan ($367 billion) in January-April, the most ever for the period, according to Bloomberg calculations based on data released by the Finance Ministry on Tuesday. The shortfall swelled by more than 50% compared with a year earlier. It's the clearest evidence yet that Beijing shifted into a higher gear in deploying this year's planned fiscal stimulus to help the economy weather external shocks. US tariffs on most Chinese goods rose to a prohibitively high level of 145% in April before the two countries agreed to a truce earlier this month. Outlays soared against the backdrop of stabilizing earnings. Total income in China's two main fiscal books reached 9.32 trillion yuan in January-April, a decline of only 1.3% year-on-year after a much steeper drop during the first quarter. Total expenditure rose 7.2% to 11.97 trillion yuan, the data showed. That number combines spending under the general budget, which includes mainly everyday outlays, with expenditure in the government fund budget, which is more weighted toward capital investment projects. Looking ahead, the urgency of further fiscal support is waning after an agreement by China and the US to temporarily lower tariffs levied against each other's products. The truce, along with decent economic activity numbers for April, has led a few major international banks to raise their forecasts for China's growth this year and dial back expectations of additional stimulus by the government. Tuesday's fiscal figures have given them more reasons to bet on the government delaying new supportive measures. 'Government spending was accelerating while revenue shows signs of stabilization,' said Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group. 'The need for expanding fiscal deficit in the middle of the year has declined.' Why Apple Still Hasn't Cracked AI Anthropic Is Trying to Win the AI Race Without Losing Its Soul Microsoft's CEO on How AI Will Remake Every Company, Including His Cartoon Network's Last Gasp DeepSeek's 'Tech Madman' Founder Is Threatening US Dominance in AI Race ©2025 Bloomberg L.P.
Business Times
24-04-2025
- Business
- Business Times
China kicks off special bond sale as tariffs threaten economy
[NEW YORK] China issued the first batch of special sovereign bonds for the year on Thursday (Apr 24) as part of the stimulus announced by authorities to soften the blow from simmering trade tensions with the US. The Ministry of Finance issued a three-part special sovereign bonds which had a planned size of 286 billion yuan (S$51.6 billion). The bond sale is to fund the fiscal package approved in March, but unlike sovereign debt, special bonds are issued for specific purposes and are not accounted for in China's record high fiscal deficit target of 4 per cent for the year. The latest round of issuance comes as Beijing looks to ramp up spending to defend the economy from the onslaught of 145 per cent US tariffs on Chinese goods, which can make Beijing's 5 per cent growth target for 2025 hard to achieve. 'The government is accelerating the pace of fiscal policy support to offset the tariff shock,' said Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group. 'We expect a supply peak in the next couple of months and People's Bank of China (PBOC) will keep liquidity steady.' Thursday's issuance consisted of 165 billion yuan of five-year special bonds for bank capital injection as state-owned banks struggle with thin profit margins amid the economic malaise. China plans to sell a total of 500 billion yuan of such bonds by Jun 4. The five-year notes were sold at an average yield of 1.45 per cent, according to a trader who bids at the government debt auctions. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Also on offer on Thursday were 50 billion yuan and 71 billion yuan of 20- and 30-year special bonds, respectively. Those are part of the 1.3 trillion yuan of 20-, 30- and 50-year ultra-long special sovereign notes that will be offered through October. The total issuance quota of ultra-long special sovereign bonds this year is higher than the one trillion yuan sold last year. Proceeds from the sale will be used for financing consumer goods purchases, building major infrastructure projects and encouraging businesses to update equipment. The 20-, 30-year notes were priced at 1.98 and 1.88 per cent, respectively, said the trader who isn't allowed to speak publicly. The bid-to-cover ratio for these bonds exceeded three times, in a sign of strong investor demand, the trader said. The special bond issuance results were in line with market expectations, said Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group. 'The government is accelerating the pace of fiscal policy support to offset the tariff shock.' Despite the impending supply of bonds, the market is showing no signs of stress as some expect the PBOC to cut interest rates or the amount of cash banks must keep in reserve this year to bolster growth. The benchmark 10-year bond yield was just around five basis points shy of a record low touched in February. China's overnight repo rate hovered around 1.6 per cent on Thursday, the lowest since January, in a sign of ample cash levels to help cushion the increased debt supply. 'We expect a supply peak in the next couple of months and People's Bank of China will keep liquidity steady,' said ANZ's Xing. The PBOC may use tools such as outright reverse repurchase agreements to manage liquidity, ANZ's Xing said. 'It could also consider resuming buying of government bonds or cutting the required reserve ratio to inject liquidity at proper time.' BLOOMBERG
Business Times
24-04-2025
- Business
- Business Times
China to kick off special bond sale as tariffs threaten economy
[NEW YORK] China is set to issue the first batch of special sovereign bonds for the year on Thursday (Apr 24) as part of the stimulus announced by authorities to soften the blow from simmering trade tensions with the US. The Ministry of Finance plans to raise 286 billion yuan (S$51.6 billion) via a three-part issuance later in the day, according to Bloomberg calculations. The bond sale is to fund the fiscal package approved in March, but unlike sovereign debt, special bonds are issued for specific purposes and are not accounted for in China's record high fiscal deficit target of 4 per cent for the year. The latest round of issuance comes as Beijing looks to ramp up spending to defend the economy from the onslaught of 145 per cent US tariffs on Chinese goods, which can make Beijing's 5 per cent growth target for 2025 hard to achieve. 'The government is accelerating the pace of fiscal policy support to offset the tariff shock,' said Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group. 'We expect a supply peak in the next couple of months and People's Bank of China (PBOC) will keep liquidity steady.' Thursday's issuance consists of 165 billion yuan of five-year special bonds for bank capital injection as state-owned banks struggle with thin profit margins amid the economic malaise. China plans to sell a total of 500 billion yuan of such bonds by Jun 4. China also plans to issue 50 billion yuan and 71 billion yuan of 20- and 30-year special bonds, respectively on Thursday. Those are part of the 1.3 trillion yuan of 20-, 30- and 50-year ultra-long special sovereign notes that will be offered though October. The total issuance quota of ultra-long special sovereign bonds this year is higher than the one trillion yuan sold last year. Proceeds from the sale will be used for financing consumer goods purchases, building major infrastructure projects and encouraging businesses to update equipment. Despite the impending supply of bonds, the market is showing no signs of stress as some expect the PBOC to cut interest rates or the amount of cash banks must keep in reserve this year to bolster growth. The benchmark 10-year bond yield was just around five basis points shy of a record low touched in February. The PBOC may use tools such as outright reverse repurchase agreements to manage liquidity, ANZ's Xing said. 'It could also consider resuming buying of government bonds or cutting the required reserve ratio to inject liquidity at proper time.' BLOOMBERG
Yahoo
24-03-2025
- Business
- Yahoo
China Saves Fiscal Power for Trade War as Spending Progress Lags
(Bloomberg) -- China's government appears in no rush to implement its budget, as Beijing preserves spending power to counter any damage inflicted by higher US tariffs. They Built a Secret Apartment in a Mall. Now the Mall Is Dying. Chicago Transit Faces 'Doomsday Scenario,' Regional Agency Says LA Faces $1 Billion Budget Hole, Warns of Thousands of Layoffs New York Subway Ditches MetroCard After 32 Years for Tap-And-Go Libraries Warn They Could Be 'Cut off at the Knees' by DOGE The combined expenditure in the general public budget and the government fund account, China's two main fiscal books, rose to 5.65 trillion yuan ($779 billion) in the first two months, an increase of 2.9% from the same period a year earlier, according to Bloomberg calculations based on data released by the Ministry of Finance on Monday. That's about 13.38% of the outlays planned for the full year by the government, the weakest start to a year since 2022. 'The spending progress slowed slightly, mainly because authorities need to reserve fiscal strength for uncertainties to come to ensure the economy continue to recover,' said Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group. China's consumption, investment and industrial production expanded more than economists had expected in January-February, buying Beijing some time before it needs to unleash more stimulus. Policymakers have repeatedly said they have ample room and tools to aid the economy. It's set to come under greater pressure in the coming months once the impact from US tariffs spreads to more Chinese firms while President Donald Trump threatens higher levies. Total income under the two major budgets fell 2.9% to 5.02 trillion yuan in the first two months of the year as tax revenue continued to drop while land sales by local governments slumped by 15.7%. The shortfall between spending and income came in at nearly 622 billion yuan, double the gap seen last year. The deficit was funded by heavy debt issuance, with net government bond financing in January-February hitting nearly 2.4 trillion yuan, a record high for the period. Some of the proceeds were meant to go toward refinancing the so-called hidden debt previously taken by firms affiliated with local governments to fund infrastructure projects. What Bloomberg Economics Says... 'To maximize the impact of the fiscal stimulus announced at the National People's Congress, China must front-load spending in 2025 — breaking an old habit that's hard on the economy. Recent bond issuance running at more than twice the year-earlier amount suggests officials are making efforts to do so.' — David Qu and Chang Shu. For full analysis, click here ANZ's Xing expects fiscal expenditure to accelerate 'significantly' from the second quarter as US tariffs start to take a toll on Chinese exporters and manufacturers. --With assistance from Jing Zhao and James Mayger. (Updates with chart, adds budget deficit data in eighth paragraph.) A New 'China Shock' Is Destroying Jobs Around the World How TD Became America's Most Convenient Bank for Money Launderers The Richest Americans Kept the Economy Booming. What Happens When They Stop Spending? Tesla's Gamble on MAGA Customers Won't Work One Man's Crypto Windfall Is Funding a $1 Billion Space Station Dream ©2025 Bloomberg L.P.
