Previously, local governments asked for money, money was given and then no one took action, said one source.
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One trillion yuan of unspent funds is equivalent to about 6 per cent of the mainland’s projected total government spending for the year.
In a clear sign that Chinese policymakers are taking steps to address flagging economic growth, government fiscal spending soared in August with the nation’s ministry of finance revealing an annual increase in expenditure of 25.9%. The huge funds left unspent support the argument of some analysts claiming that this year Chinese state investment has grown too slowly.
“China’s economy has recently slowed, with (weakness seen) mainly in the manufacturing sector”.
Chinese equity markets have dropped around 40 percent since mid-June despite frantic attempts by the authorities to curb speculation and pressure state-owned institutions to buy up stocks.
A number of economists, however, have said China needs to loosen its purse strings because monetary easing alone isn’t enough to stimulate the economic growth.
Xu Kunlin, head of the National Development and Reform Commission’s (NDRC) Fixed-Asset Investment Bureau, made the comments at a briefing in Beijing.
As part of sweeping reforms proposed by the government at the end of 2013, China is pursuing its boldest-ever anti-graft campaign that has felled a former domestic security chief, among others.
While the campaign has been a hit with the public, it has also had the unintended effect of scuppering spending as fearful officials eager to stay out of trouble resort to early retirement or dither over approving major projects.
In a bid to encourage more spending and reduce the nation’s local-government debt burden, Beijing this year approved a 3.2 trillion yuan debt-swap program, which enables local governments to swap their higher-cost, short-term bank loans for cheaper, longer-term bonds.
Reuters calculations based on central bank data released on Monday showed that China sold a record net 723.8 billion yuan ($113.69 billion) in August, showing the price the country is paying to keep its currency from falling.
“Due to the crackdown (on corruption), most local officials have accomplished nothing”, said the second source, who has ties to the leadership.
Data in the past week has pointed to a further cooling in the Chinese economy in August, adding to expectations that GDP growth in July-September would be below 7 percent.
China this year is set to post its slowest economic growth in a quarter of a century.
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