(Yicai) April 23 -- With the support of the CNY1 trillion (USD138 billion) of special government bonds issued in the final months of last year, China’s fiscal spending rose 2.9 percent in the first quarter of 2024 from a year ago, helping to underpin the country’s economic recovery.

General public budget expenditure was close to CNY7 trillion (USD966.3 billion) in the three months ended March 31, accounting for nearly 25 percent of the annual budget and higher than the average over the past three years, finance ministry figures showed yesterday.

The increase was not easily achieved after the high base a year earlier that resulted from the cost spending related to pandemic prevention and control measures, Vice Finance Minister Wang Dongwei said at a press briefing yesterday. It reflects the early implementation of a proactive fiscal policy, he added.

The additional CNY1 trillion raised by special treasury bonds had reached local governments by this February, so most will be put to use in 2024, Wang said. The funds mainly target disaster prevention, control, and emergency management, with spending in these areas jumping 53 percent in the first quarter, he added.

The central government will issue a further CNY1 trillion of ultra-long special treasury debt this year, while also hastening sales of local government special bonds and the use of the funds so raised, Luo Zhiheng, chief macroeconomist at Yuekai Securities, told Yicai.

This support will strengthen the foundation of the country’s economic recovery in the second quarter and prices are expected to rebound, resulting in a virtuous cycle, Luo added.

China’s gross domestic product rose 5.3 percent to CNY29.6 trillion (USD4.1 trillion) in the first quarter, higher than market expectations. The consumer price inflation was unchanged, while producer prices fell 2.7 percent. 

From January to March, the country’s general public budget revenue fell 2.3 percent to CNY6.1 trillion, the finance ministry also said. But when special factors related to taxation policy are excluded, it rose 2.2 percent.

After removing the special factors, fiscal revenue continued to recover, but the increase was slower than GDP growth in the same period. This can be explained by tax cuts and the impact of poor real estate sales, said Feng Lin, director of research and development at Golden Credit Rating.

Editors: Dou Shicong, Emmi Laine