Xinhua — China's proactive fiscal policy gains steam

China is expected to take a more proactive stance on fiscal policy to steady growth and help restructuring in the second half of this year. 

The State Council, China's cabinet, issued a plan on effective use of fiscal capital with ten specific measures last week, to put surplus funds to good use and speed up public private partnerships (PPP). 

China's factories did better last month, with the HSBC flash manufacturing purchasing managers' index (PMI) creeping up to 49.6 in June from May's 49.2, but still a notch below the 50-point boom-bust line. 

"The data adds to evidence that the sector has lost momentum in the second quarter as a whole, and suggests that authorities may step up growth stimulation and job creation in the second half," Markit economist Annabel Fiddes said. 

China's central bank has cut interest rates three times since November last year and twice this year, and has lowered the amount of cash banks must hold as reserves, to boost growth. 

Compared with monetary policy, fiscal expenditure can be a more direct and flexible management tool. 

China's fiscal deficit this year is to be raised to 2.3 percent of gross domestic output from 2.1 percent in 2014 with the aim of expanding investment in infrastructure and creating jobs.

Unlike the 4-trillion yuan stimulus package in late 2008, current measures focus on financial burdens for businesses and the provision of public goods and services. 

"More proactive fiscal policies will help steady growth in the second half of this year with more effective use of surplus budgetary funds," said Bian Quanshui, an analyst with China International Capital Corporation Ltd.(CICC). 

"It will have the same effect as adding more fiscal capital without raising the government's debt and help fiscal policy play a better role in macro-economic management," Bian added.

Global Times
China's proactive fiscal policy gains steam

Xinhua