China's budget deficit nears record $1 trillion as economy slows

China’s broad fiscal deficit hit an all-time high in the first nine months as Covid outbreaks and a housing market slump continue to erode government income.

The deficit in the budgets for all levels of government was 7.16 trillion yuan ($980 billion), according to Bloomberg calculations based on data released by the Ministry of Finance on Tuesday. That is a record for any comparable period and is almost three times the 2.6 trillion yuan shortfall in January-September last year.

Chinese authorities have struggled to make ends meet this year as massive tax rebates and the persistent housing market crisis have cut government income sharply. However, repeated lockdowns of major cities to contain Covid outbreaks have meant more spending on controlling and testing people, while there’s been demands to spend more on infrastructure to spur economic growth.

Economic growth rebounded to 3.9 per cent in the third quarter, after the lockdown of Shanghai and other cities earlier in the year pushed GDP to near stagnation in the second quarter. The pickup was fueled by increasing investment in infrastructure, though retail sales weakened and unemployment increased.

Meanwhile, according to CNN Business, Hong Kong stocks had their worst day since the 2008 global financial crisis, just a day after Chinese leader Xi Jinping secured his iron grip on power at a major political gathering.

Hong Kong’s benchmark Hang Seng (HSI) Index plunged 6.4 per cent on Monday, marking its biggest daily drop since 2008. The index closed at its lowest level since April 2009. And Chinese yuan weakened sharply, hitting a fresh 14-year low against the US dollar on the onshore market.  On the offshore market, where it can trade more freely, the currency tumbled 0.8 per cent, hovering near its weakest level on record,  according to the National Bureau of Statistics.