China’s budget revenue growth accelerates as economy recovers
China’s fiscal revenue growth accelerated in the first eight months from the January-July period, Finance Ministry data showed on Friday, indicating that local fiscal tensions eased slightly, although income from land sales decreased.
Tax revenue rose 3.7% in January-August from a year earlier, after adjusting for the impact of value-added tax credit refunds, topping a 3.2% rise during the first seven months.
Pre-adjustment revenue fell 8% to 13.8 trillion yuan ($1.97 trillion) in the first eight months.
In August alone, tax receipts rose 5.6%, the first gain since April, according to Reuters calculations based on official data.
Government revenue from land sales continued to contract but at a much less drastic pace, falling 4.9% in August from a 33.2% decline in July, according to Reuters calculations.
Local governments have relaxed rules on land transactions to encourage purchases by property developers, who have become cautious due to tight liquidity.
“Homebuyers in some cities have refused to make mortgage payments on unfinished homes, which has exacerbated cash flow problems for property developers. Falling house prices further weighed on buyer sentiment,” Moody’s said in a research note.
“We expect regional local government land sales to continue to decline, albeit at a slower pace, in the second half of the year.”
Many local governments are facing fiscal strains this year due to massive tax cuts and lower revenue from land sales as developers have grown cautious during the property crisis, while spending has increased due to mass COVID testing.
China’s economy showed surprising resilience in August, with faster-than-expected growth in manufacturing output and retail sales, supporting a fragile recovery, but the worsening property crisis weighed on the outlook .
Policymakers have announced more than 50 economic support measures since late May and have highlighted this quarter as a critical time for policy action.
Fiscal spending totaled 16.5 trillion yuan in the first eight months, up 6.3 percent from a year earlier, according to data from the Ministry of Finance.
Spending growth in August slowed to 5.6% from 9.9% in July, according to Reuters calculations based on the data.
Source: Reuters (Reporting by Ellen Zhang, Kevin Yao and Liangping Gao; Editing by Hugh Lawson and Edmund Klamann)