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Spending burst results in a deficit

CHINA swung into a deficit last year after a huge burst of government spending in the year's final weeks to combat the economic slowdown, the Ministry of Finance revealed in data published yesterday.

The combined spending of central and local governments was 1.66 trillion yuan (US$243 billion) in December, up 30.8 percent on a year earlier. That far outstripped fiscal revenues of 325 billion yuan in the month, an increase of 3.3 percent on a year earlier, the ministry said on its Website.

The result was a striking reversal in the Chinese budget picture. China closed its books on last year with an implied public deficit of about 111 billion yuan after entering the final month sitting on a surplus of 1.2 trillion yuan.

The mild deficit, amounting to roughly 0.4 percent of gross domestic product, still leaves Beijing with ample room to open its cash taps and cut taxes, cushioning drops in export income and private investment.

China ran a surplus of 0.7 percent of GDP in 2007, according to official figures.

China ramped up spending toward the end of last year as the global financial crisis and a domestic property downturn weighed more heavily on the economy, dragging growth to a seven-year low of 9 percent.

The government has pledged 4 trillion yuan in stimulus spending over the next two years. Many of the stimulus projects, from reconstruction in the country's earthquake-hit southwest to road and rail upgrades nationwide, are already in full swing.

The ministry did not explain the jump in expenditures in December. It did, however, say the slower growth in revenues was because of weaker corporate profits and tax cuts against the background of the global financial crisis.


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