Finance official warns of fiscal pressure

BEIJING - A finance ministry official has warned that the Chinese government will face growing fiscal pressure, as an economic downshift is denting fiscal revenues and expenditure keeps rising.

"The conflict between fiscal income and spending will gradually become more prominent in the coming period," Chinese Vice Finance Minister Li Yong said, as quoted in a press release posted on the Ministry of Finance website on Wednesday.

Fiscal revenues have increased markedly slower this year due to the softening economy, slipping company profits and government tax breaks that were aimed at stimulating growth, Li said.

At the same time, the government is likely to increase spending in a bid to support economic restructuring, environmental protection and reforms, while outlays for education, healthcare and social security can't be scaled back, he said.

China's fiscal revenues grew 11.9 percent year-on-year to 10.89 trillion yuan ($1.73 trillion) in the first 11 months of the year, according to MOF data.

The growth was outpaced by fiscal expenditure during that period, which rose 17.9 percent year on year to 10.5 trillion yuan. It was also sharply slower than the 26.8-percent revenue increase seen in the same period of last year.

The fiscal pressure, together with potential financial risks, rising production costs and weakening demand, will threaten future growth despite recent signs of recovery in the world's second-largest economy, Li said.

China's economy expanded 7.4 percent year on year in the third quarter of 2012, slowing for a seventh consecutive quarter due to flagging exports and property investment.