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Fiscal surplus to support economic growth

By Ding Qi (chinadaily.com.cn)
Updated: 2008-08-07 18:40

Official statistics show that the nation's fiscal surplus topped 1.1 trillion yuan ($161 billion) in the first half of this year, but more funds will be spent in the second half to support steady economic development, the China Securities Journal reported on Thursday.

According to statisitics from the Ministry of Finance, the country's fiscal revenue reached 3.48 trillion yuan in the first half of the year, up 33.3 percent from the same period last year, while fiscal expenditure grew 27.7 percent to 2.29 trillion yuan. The fiscal surplus stood at 1.19 trillion yuan in the first half.

The surplus was much higher compared to that of the same period in past years despite a slowdown in economic growth this year, analysts said.

According to Zhang Yongjun, a researcher from the State Information Center, a government think thank, the large surplus was partly due to an unsynchronized pace of income and spending.

During the first half, the nation's fiscal revenue accounted for 59.52 percent of the whole year's budget income while the expenditure only accounted for 37.64 percent of the annual plan, Zhang said.

Li Huiyong, an analyst from Shenyin & Wanguo Securities, said although the nation's GDP growth during the first half of the year fell, the nominal GDP, which has not been adjusted for inflation, grew faster, which leads to a higher fiscal revenue.

However, both analysts expect fiscal surplus will shrink during the second half. One reason is that a slowdown of import growth and adjustment of tax rebate policies could reduce fiscal income. In addition, expenditure may increase during the second half due to post-disaster reconstruction and restructure needs, Li said.

Li also noted that given the big sum of funds at hand, the govenment can play a larger role in fiscal policies that support the nation's economic development.

He suggested adjusting the taxation policy, including scrapping the interest tax and increasing tax rebates for some industries. Meanwhile threshold subejct to taxtation for small- and medium-sized enterprises can be raised to support their development.

In terms of fiscal expenditure, the government should invest more to support reconstruction of disaster-hit areas and agricultural production. Under certain circumstances, large infrastructure projects can also propel economic growth, Li said.

However, Zhang didn't expect a large-scale tax cut during the second half due to other expenditures. He said that local governments may seek to cut non-tax charges such as administrative fees to alleviate the enterprises' burden.