What’s up with China’s fiscal policy? The puzzle of recent budget data

Abstract

China’s budget data for the first seven months of 2021 sprang some surprises. First, the budget nearly perfectly balances, with ordinary budget revenues amounting to RMB13.77 trillion and expenditures to RMB13.79 trillion. If this trend were to hold for the year, it would mark the first time since 1985 that the government’s general budget has been in or near balance. MOF (Ministry of Finance)-reported expenditures were 3.3% higher than that for the same period in 2020. Due to the disruptions of the COVID-19 pandemic last year, a better comparison is with the pre-COVID budget of 2019, against which the 2021 expenditures were 1% lower for the same period, with a deep 12.5% cut in central gover..