China's Budget Expenditure Sees Largest Decline in Six Months in April

The Chinese government significantly tightened fiscal spending in April this year, directly leading to a comprehensive and unexpected slowdown in domestic real economic activity.

According to Bloomberg calculations based on data from the Ministry of Finance, general fiscal expenditure declined by 7.3% year-on-year in April, marking the largest drop since the middle of last year, while general fiscal revenue increased by 2% during the same period. The sharp reduction in spending directly triggered an unexpected contraction in fixed asset investment in April, which not only dragged down the overall economic vitality but also erased the upward momentum in investment that began at the start of the year.

Economists analyze that the robust performance of the economy in the first quarter weakened the official impetus to continue spending, and the funding gap caused by the transition between old and new projects, coupled with the pressure to repay corporate debts, also limited fiscal leverage. Among the main budget items, spending related to infrastructure construction in April plummeted by 17.7% year-on-year, indicating the severe risk of deceleration of infrastructure investment in the short term.

For investors, some institutions estimate that the economic growth rate in April has slowed to around 4%, below the official target of 4.5% to 5% for the whole year, which means that the policy room for maneuver in the latter period is reopening. To ensure the achievement of the annual growth target, it is highly probable that the Chinese government will increase infrastructure spending again to strengthen the hedging and bottoming-up support for the real economy.

The market's next focus is on the pace of implementation of the cross-industry major infrastructure network promised by the Politburo meeting in April. According to Guojin Securities' estimations, the investment scale of related key infrastructure projects this year is expected to exceed 7 trillion yuan. Whether this substantial funding can be accelerated into actual engineering volumes in the second half of the year will become the core indicator in reversing the decline in investment and determining the subsequent economic trend.