An up-tick in China's fiscal revenue situation signals a recovery in the economy and gives the government more room to use active fiscal measures to boost it, experts said.

And, June to October would be the key period when the treasury would be able to judge whether it can realize an earlier target of 8 percent year on year revenue growth, they pointed out.

China's nationwide fiscal revenue was up 4.8 percent in May from a year earlier, at 656.9 billion yuan, reversing the downward trend of the past few months, the Ministry of Finance (MOF) said yesterday. The national revenue in April had dropped 13.6 percent from a year earlier. And, combined central and local government revenues in the first five months totaled 2.71 trillion yuan, a fall of 6.7 percent year on year.

"The rise in May is a signal the economy is recovering. Hopefully, starting from May, the national fiscal revenue would begin to show positive growth," Jia Kang, president of the Institute of Fiscal Science, Ministry of Finance said.

According to Zhao Quanhou, a senior researcher at the same institute, the reason why May figures have turned positive was because many projects that were included in the government's 4-trillion yuan stimulus plan last year were launched only recently.

"Though the stimulus plan was announced in November, many of projects were actually launched in spring, and is now starting to contribute to the economic growth," Zhao said.

Experts pointed out that May revenue growth leaves much room for the treasury to use more fiscal measures to stimulate the economy.

"Despite that, there still is huge pressure on China to realize an 8 percent revenue growth in 2009," Jia warned.

In a statement on its website, the ministry said the economic slowdown and tax cuts were the underlying factors behind the fall in fiscal revenue in the January-May period.

"The key period is from June to October. We need to watch closely the figures in the coming months, and see if the economy is really starting to recover," Zhao said.

The Chinese government expects revenue to grow 8 percent in 2009, much slower than previous years. Its revenue climbed 18.8 percent in 2008 and 32.4 percent in 2007.

(China Daily June 16, 2009)