Latest news with #budgetdeficit
Yahoo
19 hours ago
- Business
- Yahoo
China Social Spending Hits Highest Level in Nearly 2 Decades
(Bloomberg) -- China's government spending has pivoted toward social welfare to a degree unseen for at least a generation, as it runs a record budget deficit with a focus on boosting consumption to cushion the blow from Donald Trump's tariffs. Budapest's Most Historic Site Gets a Controversial Rebuild San Francisco in Talks With Vanderbilt for Downtown Campus Can This Bridge Ease the Troubled US-Canadian Relationship? Trump Administration Sues NYC Over Sanctuary City Policy The latest evidence arrived on Monday, when China announced it will start offering nationwide cash handouts to families as an incentive for couples to have children. While Beijing is channeling less on-budget investment into infrastructure, expenditure that covers outlays ranging from education to employment and social security climbed to nearly 5.7 trillion yuan ($795 billion) in the first half — the highest for the period since the data series began in 2007. That represents an increase of 6.4% from a year earlier, according to Bloomberg calculations based on figures published by the Ministry of Finance. Authorities could renew their pledge to prioritize support for domestic demand, as top officials prepare to meet this month to set the economic agenda for the rest of the year while trade talks with Washington continue. The splurge was almost double the increase in total spending under the general public budget, the first and biggest account among the government's four fiscal books. Infrastructure-related expenditure in the account — allocated for costs such as environmental protection, irrigation facilities and transportation — was 4.5% less than a year earlier. Fiscal priorities have shifted after the trade war unleashed by Trump threatened China with millions of job losses and put pressure on its patchy social safety net. Under the new policy of childcare subsidies, the government will spend 3,600 yuan a year per kid under the age of three, according to the official Xinhua News Agency. Citigroup Inc. estimates a total lump-sum payout of 117 billion yuan in the second half of 2025, while Morgan Stanley puts the program's annual cost at 100 billion yuan, assuming about 9 million births a year. Although President Xi Jinping has in the past resisted large-scale handouts to families over what he's called 'welfarism,' China responded in recent months by ramping up government support for households. The goal is partly to bolster domestic demand in the face of US tariffs, which have sent the country's shipments to the world's biggest consumer market slumping this year. 'Better supporting people's well-being will help boost domestic demand and is part of the rebalancing of the Chinese economy,' said Tommy Xie, head of Asia macro research at Oversea-Chinese Banking Corp. At the same time, China launched construction of a 1.2 trillion yuan mega-dam in Tibet this month, a massive project that will likely take years to complete. 'The room for infrastructure expansion in the future will shrink marginally' even though it can play a 'supporting role at critical times,' OCBC's Xie said. Social security and employment saw the biggest gain in spending related to people's well-being, up almost 8% in the first half from a year earlier. A survey carried out by China's central bank showed an employment sentiment index hit a record low in the second quarter, illustrating the need for more government aid for job seekers. Outlays on education increased 5.9% and rose 4% on medical treatment and health care. Meanwhile local governments' tapping of the annual quota of new bonds meant mainly for infrastructure investment slowed. Provinces have issued about 56% of new special local bonds allowed for this year, down from an average of 61% for January-July in the five years through 2024, according to Bloomberg calculations based on MOF numbers. Previously, the favored way to jumpstart growth was by spending on areas like roads, railways or industrial parks, much of it done by provincial governments. Instead, the government has accelerated the issuance of sovereign notes this year, primarily to cover the budget shortfall for routine public expenditure. Chinese provinces also sold substantial volumes of bonds in the first seven months to refinance their so-called hidden debt, as Beijing seeks to contain credit risks from deteriorating local finances. What Bloomberg Economics Says... 'An uneven consumption recovery in the first half highlights a key risk for China's growth outlook: a sustained improvement in domestic demand may require time to take hold. The experience from 1998–2003 suggests that even with strong policy support, lasting gains in consumer spending can be slow to emerge — with false starts along the way.' — David Qu and Chang Shu. For full analysis, click here Government borrowing was crucial for replenishing state coffers depleted by China's years-long property slump. Revenue from real estate-related taxes, including deeds and urban land use, fell 5.6% on year in the first half to 975.3 billion yuan. Provinces earned 1.43 trillion yuan in the period from selling land, a contraction of 6.5% despite a rebound of over 20% in June thanks to market recovery in some big cities. Economists at Goldman Sachs Group Inc. cautioned, however, on 'the sustainability of land sales revenue improvement' and maintained their forecast that government land sales revenue may decline further this year by up to 10%. Total tax revenue shrank 1.2% on year in the first half to 9.29 trillion yuan, with income from levies on such transactions as vehicle purchases posting double-digit declines. Non-tax revenue — which includes compensation for the use of state-controlled resources and assets and fines — rose 3.7% to 2.27 trillion yuan. It grew despite a decline in the money collected from fines, a Finance Ministry official said at a Friday briefing. Revenue from the tax on vehicle purchases plunged 19.1% in January-June from a year ago, the biggest drop among all categories and more than triple its decline in the same period of 2024. Slumping income from the vehicle purchase tax shows the impact of the government's decision to extend the suspension of a levy on buying new energy vehicles, such as electric cars, to 2027, Huachuang Securities analysts including Zhang Yu wrote in a note on Friday. The shift away from fuel-powered cars also weighed on revenue from the consumption tax by reducing demand for gasoline and diesel, they said. The government is losing a total of 265 billion yuan per year in revenues from the vehicle purchase tax and the consumption levy due to the pivot to cars powered by alternative-energy sources, Huachuang Securities estimates. (Updates with detail on government bond issuance this year.) Burning Man Is Burning Through Cash It's Not Just Tokyo and Kyoto: Tourists Descend on Rural Japan Cage-Free Eggs Are Booming in the US, Despite Cost and Trump's Efforts Everyone Loves to Hate Wind Power. Scotland Found a Way to Make It Pay Off Elon Musk's Empire Is Creaking Under the Strain of Elon Musk ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
a day ago
- Business
- Bloomberg
China's Social Spending Hits Highest Level in Nearly Two Decades
China's government spending has pivoted toward social welfare to a degree unseen for at least a generation, as it runs a record budget deficit with a focus on boosting consumption to cushion the blow from Donald Trump's tariffs. The latest evidence arrived on Monday, when China announced it will start offering nationwide cash handouts to families as an incentive for couples to have children. While Beijing is channeling less on-budget investment into infrastructure, expenditure that covers outlays ranging from education to employment and social security climbed to nearly 5.7 trillion yuan ($795 billion) in the first half — the highest for the period since the data series began in 2007.
CBS News
6 days ago
- Business
- CBS News
Pittsburgh controller describes the city's financial situation as "precarious"
Pittsburgh City Controller Rachael Heisler's annual fiscal report found the city is spending more money than it's taking in. Heisler describes the city's financial situation as "precarious." The city is spending more money than it's taking in while failing to maintain its deteriorating fleet, adequately staff its public safety forces or even turn on most of the water fountains in the summer months. "We need to make sure that the city is handling its basic functions: keeping people safe and keeping things clean," Heisler said. Releasing her annual fiscal report on Wednesday, the controller says the city is not yet in a crisis, but will be unless steps are taken to rein in non-essential spending and raise new revenue. She says the city has spent $24 million more this year than last, and at mid-year has depleted 77 percent of its overtime budget, projecting it will outspend that budget by $20 million. "This is a significant increase and unsustainable," Heisler said. The city denies it is close to crisis but concedes overtime is a "long-term challenge." Still, in a statement, Deputy Mayor Jake Pawlak said union negotiations and unexpected increases in wage and real estate revenues may offset those increases. "While we believe that reforms to overtime usage will ultimately play a role in solving this problem, it's clear that process is taking longer than we projected to show the anticipated results," Pawlak said. "That being said, the scale of this issue is manageable, offset by savings elsewhere in the budget and does not give us cause for alarm." Heisler said the city must move aggressively to encourage job growth and negotiate a deal with the non-profit hospitals and universities for payments in lieu of taxes — something, she says, the Gainey administration has not achieved, which has filed challenges against tax-exempt properties. "When you're in active litigation against them, you're not going to hit a point where you're engaging in conversation about voluntary payments toward city operations," Heisler said.
Bloomberg
7 days ago
- Business
- Bloomberg
Property Tax Hike Likely in 2026 Budget: Chicago CFO
Chicago Chief Financial Officer Jill Jaworski says the city will likely seek to raise property taxes to address next year's budget deficit. She spoke to Bloomberg's Romaine Bostick in a wide-ranging interview at a Bloomberg New Voices event in Chicago. (Source: Bloomberg)
Bloomberg
23-07-2025
- Business
- Bloomberg
Chicago CFO Says Property Tax Hike Likely in 2026 Budget Package
Chicago Chief Financial Officer Jill Jaworski said the city will likely seek to raise property taxes to address next year's budget deficit. 'It is likely that that will be part of the package,' Jaworski said in an interview at Bloomberg's New Voices event in Chicago on Tuesday. 'We haven't rolled out the full package yet, but the package is going to include cuts, and it is going to include proposals for increasing our revenues.'
