The fiscal income growth is projected to slow further this year, adding further pressure to the State exchequer, the finance minister said on Monday.

"The slowing trend, which began in the second half of 2008, will continue this year," Xie Xuren told a working conference. "The conflict between unbalanced income and spending will be prominent this year."

Last year's fiscal revenue might have crossed 6 trillion yuan (US$878 billion), up 19 percent over 2007, Xie said. The growth rate was 33.3 percent for the first half, when the global financial crisis broke out.

Government expenditure on rural development, education, healthcare and social security last year could have risen 38 percent, 47 percent, 25.2 percent and 19.9 percent, he said.

The figures are statistical estimates because the official data for 2008 are yet to be released.

The fiscal income growth has slowed since the second half as the worsening economic climate hurt corporate profitability and investment, he said.

The combined profit of the 142 largest State-owned enterprises is likely to have fallen 30 percent to 700 billion yuan last year, the first drop since 2002, the State-owned Assets Supervision and Administration Commission said.

Last year, the government raised the level of tax rebates to bolster exports, reduced taxes on house purchase to support the real estate market, and cut interest on savings and stamp duty of stock trading to boost the financial market. The slowing of fiscal revenue growth could be partly attributed to these moves.

Analysts said a weaker fiscal prospect meant the country's budget deficit would balloon further this year, proving critical for financing the government's US$586-billion stimulus package.

"The weaker economy calls for a heftier fiscal move to spur growth," said Zhao Quanhou, an economist with the Ministry of Finance's Research Institute for Fiscal Science. "The budget deficit is likely to cross 600 billion yuan in 2009."

As part of its proactive policy, the government is reportedly considering issuing 500 billion yuan in long-term construction treasury bonds this year. That would add to the budget deficit.

But there is plenty of room for deficit this year, provided it stays below 3 percent of the country's GDP, the analysts said. Last year's 180-billion-yuan deficit was only about 0.6 percent of the GDP.

"The government may cut taxes further this year to ease the burdens of individuals and enterprises," Zhao said.

Zhao was right because Xie said the government would continue slashing corporate and individual income taxes this year, and would not increase the stock trading tax.

(China Daily January 6, 2009)