(Yicai) Sep. 26 -- Although China’s fiscal spending reached a record CNY24.2 trillion (USD2.45 trillion) in the first eight months of this year, spending growth slowed in August, fueling calls from analysts for more forceful policy action to counter mounting economic headwinds.

Expenditure rose 8.2 percent from a year earlier, the Ministry of Finance announced recently. The pace slowed in August, with spending up 6 percent, compared with 9.3 percent growth in January to July.

Fiscal spending includes government outlays on public services, infrastructure, social security, and economic development projects. It is a key signal of fiscal stance, with higher spending generally indicating a more expansionary approach to supporting growth.

By contrast, broad fiscal revenue -- which combines the national general public budget and government fund revenue -- held steady at CNY17.5 trillion, little changed from a year ago. This left a revenue-expenditure gap of CNY6.7 trillion (USD939.1 billion), a 42 percent jump from last year. The budget completion rate for January to August stood at 57.3 percent, below the five-year average of 58.8 percent.

With revenue growth lagging, the government has leaned on the bond market to cover shortfalls. Net financing of government bonds reached CNY10.27 trillion in the first eight months, an increase of CNY4.63 trillion from a year earlier, according to data from the central bank.

Calls for Proactive Fiscal Policy

Luo Zhiheng, chief economist at Yuekai Securities, noted that production, consumption, and investment all weakened in August. He warned the ongoing property slump could drag third-quarter gross domestic product growth below 5 percent.

This, Luo argued, underscores the need for more proactive fiscal policy. One option is greater use of policy-based financial tools -- instruments that channel funds into infrastructure and other priority projects, spurring economic activity and job creation.

The National Development and Reform Commission has pledged to speed up approvals for such tools, and many provinces are preparing applications to secure funding to offset weaker fiscal revenue.

If budgets are not adjusted and no additional bond issuance takes place this year, reliance on these policy tools will increase, said Zhang Yu, deputy director of the research institute at Huachuang Securities.

Meanwhile, debt restructuring is also in focus. Yuan Haixia, director of the research institute at China Chengxin International Credit Rating, suggested that of the CNY10 trillion debt resolution quota, about CNY1 trillion in local government bonds should be issued before year-end. This would help replace hidden debt, improve liquidity, and mitigate risks tied to existing liabilities.

Editor: Emmi Laine