Government spending in China rises 10.3% year-on-year in August

13 Sep 16

Government spending in China rose 10.3% in August compared with the same period last year, according to the country’s ministry of finance.

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Steel

Increased government spending in China has bolstered demand for materials such as steel, cement and iron.

 

The figures also showed a sharp increase in expenditure compared with July, as the government works to prop up growth with increased spending. This explains the boost in growth recorded in some sectors of the economy, seen in separate figures from the National Bureau of Statistics also published today.

The government’s spending spree, much of which was concentrated on infrastructure, helped boost demand for materials including coal, iron, cement and steel, pushing China’s industrial output up 6.3% from a year earlier.

Strong housing and retail markets also contributed to the better-than-expected official economic data. This suggests the government’s target of 6.5-7% growth in 2016 is still within reach, and that the economy is stabilising after a shift away from manufacturing to services.

However, the spending figures belie a concerning imbalance between public and private investment. The latter has been cooling substantially and grew at record lows of just 2.1% in the first eight months of the year.

For now, the government has been forced to step in and pick up the slack, but analysts are questioning how sustainable its support for the economy is in the long term.

While spending in the first eight months of the year was up 12.7% on a year earlier, revenues had risen by just 6%.

Concerns around the country’s growing debt load, especially in the inefficient state-owned sector, are also on the rise.

Following years of rapid growth in the world’s second-largest economy, China was forced to undergo the difficult transition to a more sustainable, slower growth model.

The nation was knocked off the top spot as the world’s fastest growing major economy by India earlier this year. 

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