(July 21): China’s government spending plunged last month by the most since October, suggesting the government tightened fiscal policy further despite increasing calls for more support as economic growth slips.

A broad measure of government expenditure tumbled 11.9% in June from a year earlier, according to Bloomberg calculations based on Ministry of Finance data released Wednesday. By contrast, broad fiscal revenue gained 1.8%.

That took the broad deficit in the first half of the year to 4.57 trillion yuan (RM2.76 billion), 13% less than a year earlier.

Prolonged fiscal tightening has been a drag on overall investment, with economic expansion weakening more than expected in the second quarter. A shift is still likely as top officials call for faster deployment of pro-growth policies that have already been approved to ensure Beijing’s annual target of 4.5%-5% is achieved.

The government has vowed to expedite the construction of a massive “Six Networks” programme — a strategic national infrastructure push involving data centres, power grids and telecom networks aimed at positioning China for long-term growth in the new era of artificial intelligence.

Prior to that, Premier Li Qiang promised to fully leverage existing policies and study a pipeline of additional measures as part of a more active response to the economic slowdown.

Chinese provinces are already ramping up fundraising for capital expenditure.

In June, local governments issued 291.7 billion yuan of bonds primarily used for infrastructure investment, according to Bloomberg-compiled data. That’s the highest since February and more than double the amount sold in the previous month, although it remains slightly below its year-earlier level.

The trend will likely continue in the coming months, as provinces still have nearly 1.9 trillion yuan in remaining bond quota to draw down this year.

Separately, the government has also planned 800 billion yuan in new policy financing tools — a quasi-fiscal instrument used to drive investment — for this year. The funding hasn’t been tapped so far and is set for an aggressive rollout in the third quarter, the state-run Securities Times reported Wednesday.

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