China’s fiscal revenue growth accelerates as economy recovers

China’s fiscal revenue growth accelerates as economy recovers

16 Sep    Finance News

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BEIJING — China’s fiscal revenue growth speeded up in the first eight months compared with the January-July period, finance ministry data showed on Friday, indicating that local fiscal strains eased slightly although revenue from land sales shrank.

Fiscal revenue grew 3.7% in January-August from a year earlier, after adjusting for the impact of value-added tax credit rebates, exceeding a 3.2% rise in the first seven months.

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Revenue before the adjustment dropped 8% to 13.8 trillion yuan ($1.97 trillion) in the first eight months.

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For August alone, fiscal revenue grew 5.6%, the first gain since April, according to Reuters calculations based on the official data.

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Government revenue from land sales continued to shrink but at a much less drastic pace, falling 4.9% in August compared with a 33.2% drop in July, according to Reuters calculations.

Local governments have eased rules on land transactions to encourage buying by property developers, who have grown cautious due to tight liquidity.

“Home buyers in some cities refused to make mortgage payments on unfinished homes, exacerbating liquidity challenges for property developers. Weaker property prices have further weighed on buyers’ sentiment,” Moody’s said in a research note.

“We expect regional local government land sales to continue to fall, although at a slower rate, in the second half of the year.”

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Many local governments face fiscal stress this year due to massive tax cuts and less income from land sales as developers became cautious during the property crisis, while spending has risen due to mass COVID testing.

China’s economy showed surprising resilience in August, with faster-than-expected growth in factory output and retail sales shoring up a fragile recovery, but the deepening property slump weighed on the outlook.

Policymakers have announced more than 50 economic support measures since late May and stressed that this quarter was a critical time for policy action.

Fiscal spending totalled 16.5 trillion yuan in the first eight months, up 6.3% from a year earlier, finance ministry data showed.

Spending growth in August slowed to 5.6% from July’s 9.9%, according to Reuters calculations based on the data. ($1 = 7.0201 Chinese yuan renminbi) (Reporting by Ellen Zhang, Kevin Yao and Liangping Gao; Editing by Hugh Lawson and Edmund Klamann)

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