(March 24): China’s government appears in no rush to implement its budget, as Beijing preserves spending power to counter any damage inflicted by higher US tariffs.

The combined expenditure in the general public budget and the government fund account, China’s two main fiscal books, rose to 5.65 trillion yuan (US$779 billion or RM3.4 trillion) in the first two months, an increase of 2.9% from the same period a year earlier, according to Bloomberg calculations based on data released by the Ministry of Finance on Monday.

That’s about 13.38% of the outlays planned for the full year by the government, the weakest start to a year since 2022.

“The spending progress slowed slightly, mainly because authorities need to reserve fiscal strength for uncertainties to come to ensure the economy continue to recover,” said Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group.

China’s consumption, investment and industrial production expanded more than economists had expected in January-February, buying Beijing some time before it needs to unleash more stimulus.

Policymakers have repeatedly said they have ample room and tools to aid the economy. It’s set to come under greater pressure in the coming months once the impact from US tariffs spreads to more Chinese firms while President Donald Trump threatens higher levies.

Total income under the two major budgets fell 2.9% to 5.02 trillion yuan in the first two months of the year as tax revenue continued to drop while land sales by local governments slumped by 15.7%.

The shortfall between spending and income came in at nearly 622 billion yuan, double the gap seen last year. The deficit was funded by heavy debt issuance, with net government bond financing in January-February hitting nearly 2.4 trillion yuan, a record high for the period.

Some of the proceeds were meant to go toward refinancing the so-called hidden debt previously taken by firms affiliated with local governments to fund infrastructure projects.

“To maximise the impact of the fiscal stimulus announced at the National People’s Congress, China must front-load spending in 2025 — breaking an old habit that’s hard on the economy. Recent bond issuance running at more than twice the year-earlier amount suggests officials are making efforts to do so,” said Bloomberg Economics.

ANZ’s Xing expects fiscal expenditure to accelerate “significantly” from the second quarter as US tariffs start to take a toll on Chinese exporters and manufacturers.

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