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Tuesday, September 15, 2015, 09:55

'Unspent local govt budgets recalled'

By Agencies

BEIJING - Chinese authorities have reportedly recalled up to 1 trillion yuan (US$157 billion) from local governments who failed to spend their budget allocations, sources said.

The huge underspend is apparently linked to officials' reluctance to splash out on big-ticket projects while authorities crack down on corruption.

"Investments were not realised, and the money will be reallocated," said a source, an economist. He did not elaborate on how the funds would be spent.

The repossessed money will pay for other investments, said sources, as economic growth looks increasingly likely to fall below 7 percent.

One trillion yuan of unspent funds is equivalent to about 6 percent of China's projected total government spending for 2015.

The Finance Ministry was not immediately available for comment when contacted by Reuters.

Unsteady global demand and a wobbly Chinese housing market are expected to drag full-year growth to 7 percent in 2015, though many analysts suspect the true figure to be much lower.

A near 40 percent drop in China's stock market in the summer and a shock two percent depreciation in the yuan further roiled investors and policy makers.

In a sign China is prepared to crank up fiscal stimulus, the country's economic planner, the National Development and Reform Commission (NDRC), held an internal teleconference on Monday to discuss the ways to stabilise investment growth.

Measures to be taken include dispensing a second round of financing for unnamed construction projects by September, and ensuring that funding for projects paid for by the central government will be ready in the next two weeks.

An initial list of 13 public-private partnerships in project financing has also been announced, the NDRC said.

Also on Monday, China's securities regulator said a crackdown on grey-market margin financing will not have significant impact on markets, because the level of forced liquidation in the clean up is low.

Official data showed investment accounted for slightly more than a third of China's economic growth in the first six months of this year.

Data over the weekend pointed to weakness in China's economy. Growth in investment and factory output both missed forecasts in August, suggesting China needs to roll out more policy support to lift activity.

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