Fiscal revenue sharply contracted in the January-April period because business profits decreased as economic growth slowed. Corporate income tax revenue fell 27 percent, the revenue from value-added tax and consumer tax on imported goods, 17.7 percent, customs tariff revenue, 41.4 percent, and revenue from the stamp tax on stock trading, in particular, fell 64.9 percent.

Apart from the decrease in business profits, a string of proactive fiscal policies to stimulate the economy, such as tax cuts and export rebate increases, have reduced government revenue. The producer price index (PPI) and consumer price index (CPI), which were down 6.6 percent and 1.5 percent, respectively, in April, also contributed to the drop in the current value of fiscal revenue.

China Buys More U.S. Securities

Despite warnings about the risky U.S. economy, China has continued to buy U.S. securities over the past 12 months. China had accumulated $767.9 billion in U.S. securities by the end of March, making it the biggest holder of U.S. treasury bonds.

China bought $23.7 billion in U.S. securities in March and its treasury bill holdings were on the rise.

Figures from the United States showed that many countries and regions had accumulated U.S. securities in March. Japan remained the second biggest holder with total investment of $686.7 billion.

Analysts had warned the United States would print more greenbacks to pay back creditors when those securities matured, which could lead to a big slump in the value of the securities.

American Nobel Prize winner Paul Krugman had also suggested that China not buy U.S. securities during his May trip to China. He joked on his online blog that the United States was selling "fraudulent securities" to China and assumed China had fallen into a "U.S. dollar trap" and could not get out of it nor would anyone come to its rescue.

Overseas Financial Assets Boom

As a result of loosened control over foreign exchange transactions, China's overseas financial assets had soared to $2.9 trillion by the end of last year, according to the State Administration of Foreign Exchange (SAFE).

The biggest proportion was state reserve assets. By the end of last year, China had had about $2 trillion in reserves, about 67 percent of the total.

The SAFE figures also indicated China's investment in overseas securities exceeded foreign investment in Chinese securities.

However, the country's direct investment in overseas markets stayed at a low level at $169 billion, making up just 6 percent of total foreign financial assets.

The Chinese Government has been making rules and regulations guiding outbound investment. In March, it adopted Measures for Overseas Investment Management; in May, SAFE devised a draft rule on foreign exchange management for domestic institutions investing in foreign markets.

Guo Tianyong, a banking professor at Central University of Finance and Economics, said rising overseas financial assets could enhance China's ability to guard against the risks imposed by the global financial crisis.

Brazil and China: Oil for Loan

As part of the achievements of the Brazilian president's visit to China, China Development Bank agreed to lend $10 billion to Petroleo Brasileiro SA (Petrobras), Brazil's biggest oil company, over the next 10 years.

In return, Petrobras will export 10 million tons of crude oil to China annually from 2009 to 2019.

Petrobras planned to invest $170 billion from 2009 to 2013 to develop pre-salt offshore oil fields. But financing could be difficult given the fall in oil prices (from $146 in 2007 to the current $60) and the sprawling financial crisis. Brazilian Mines and Energy Minister Edison Lobao told Bloomberg that Petrobras is now seeking additional loans from China.

Before it signed the deal with China, Petrobras said it was in talks with major oil-consuming countries to get loans in exchange for oil.

Domestic experts believed the Brazilian oil-for-loan deal could generate a win-win situation. Petrobras secured a long-term and stable purchaser—China—while getting funding at a reasonable price. On the Chinese side, the country could tap into Brazil's vast oil potential to fuel its economic development.