China eased off fiscal spending in March even as its economy started the year stronger than expected, a sign Beijing may not need to lean on fresh stimulus as hard as it did last year. Public expenditure fell 2.5 percent from a year earlier, the sharpest drop since October, even as broad fiscal revenue rose 3.4 percent and left a deficit of more than 1.5 trillion yuan, according to Ministry of Finance data.
The rebound in growth helps explain the restraint. Manufacturing powered a better-than-expected first quarter, while the government also cut its annual growth target to 4.5 percent to 5 percent, its least ambitious since 1991, giving officials more room to stick with the policies already in place, as one state-backed fiscal researcher put it. First-quarter revenue also rose 2.4 percent to 6.16 trillion yuan, and spending hit a five-year high pace over January to March, suggesting the slowdown in March sat inside a broader year-to-date push.
That mix leaves winners and losers in sharper focus. Infrastructure-related spending in the main budget dropped 8.5 percent in March, more than the slowdown in investment growth, while local land-sale income fell 24.4 percent in the first quarter, underscoring how property weakness is still squeezing officials. At the same time, tax revenue rose 2.2 percent in January-March and the government has kept the bond quota little changed while lifting policy-financing tools to 800 billion yuan, a sign Beijing is trying to support activity without adding too much debt.
What happens next hinges on whether the Middle East conflict starts hitting trade or energy costs more directly. A blocked Strait of Hormuz could push oil higher and weaken export demand, but policymakers said they still have room to “adjust or optimize” measures if conditions worsen, and Goldman estimates fiscal deposits were still 340 billion yuan above a year ago, a cushion Beijing could tap if the economy stumbles. That gives China a wait-and-see option for now, not a free pass.
