China Sept government spending up 11.3 percent year-on-year, aiding growth pace

[October 19, 2016]  BEIJING (Reuters) - Government spending in China rose 11.3 percent in September from a year earlier while revenue rose 4.9 percent, the Ministry of Finance said on Wednesday.

In August, spending was 10.3 percent above a year earlier, and revenue increased 1.7 percent.

Data released on Wednesday for last month and the first three quarters signal how China has relied on government spending to stabilize growth this year, which is pushing up the country's fiscal deficit.

The deficit over the first nine months was 1.46 trillion yuan ($216.8 billion), up from 625.1 billion yuan in the year-earlier period, according to Reuters calculations.

Based on calculations using spending data released on Wednesday, deficit spending over the first nine months was equivalent to 2.7 percent of gross domestic product, within China's target for a 3 percent fiscal deficit.

Also on Wednesday, China reported that its economy expanded at a steady 6.7 percent in the third quarter, fueled by stronger government spending, record bank lending and a red-hot property market that are adding to its growing pile of debt.

A strong second-hand housing market boosted property transfer tax receipts by 27.2 percent in January-September, compared to a 23.9 percent gain in the first half of the year, the Ministry of Finance said.

TAXES ON REAL ESTATE

Corporate taxes from real estate companies increased by 25.4 percent in the first nine months from a year earlier, an increase from the 17.3 percent rise in the first half.

Government spending in the first nine months was up 12.5 percent from a year earlier, while revenue rose 5.9 percent, with the growth rates of both slowing from the first half.

Increased state spending this year has deepened concern about the size of China's fiscal deficit.

An aerial view shows an old overpass being dismantled to make way for new constructions in Taiyuan, Shanxi Province, China, in this March 17, 2016 file photo. REUTERS/Stringer/Files

"Rapidly growing state-directed investment was financed by a highly expansionary fiscal deficit, 4.4 percent of GDP in the most recent four quarters' data and the largest deficit, relative to the size of China's economy, since comparable data began in 1995," PNC senior international economist Bill Adams wrote in a note.

Liu Shangxi, head of the Chinese Academy of Fiscal Sciences under the Ministry of Finance, told Reuters that based on a broader definition of fiscal spending, the ratio is already 5-6 percent.

Beijing-based brokerage China International Capital Corporation said in a note following the data that China may raise the fiscal deficit for next year.

($1 = 6.7350 Chinese yuan)

(Reporting by Beijing monitoring desk and Elias Glenn; additional reporting by Shen Yan; Editing by Richard Borsuk)

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