China provinces see fiscal income growth rebounding in 2023

MOST Chinese provinces expect income growth to pick up as the economy recovers, though the need for more economic support poses a risk to their balance sheets, according to the state-run Securities Times newspaper.

At least 26 of China’s 31 provincial-level jurisdictions expect their general public budget revenue, which includes taxes, to grow 5 per cent or more in 2023, the publication wrote in a front-page article on Thursday (Feb 9).

Some 11 localities expect government fund budget revenue, which includes income from land sales, to grow no less than 10 per cent, the paper reported.

Local governments have become more optimistic as the world’s second-largest economy gains momentum this year, with rapid growth in new industries and business models bolstering that sentiment, the paper concluded. For instance, Henan province in central China said fiscal revenue is bound to increase as efforts to upgrade some industries and optimise the business environment take effect.

The expected income growth is welcome news for China’s provinces, most of which took a hit last year as the nation’s strict Covid Zero policy weighed on growth and as tax and fee cuts were implemented, according to the Securities Times report. A decline in revenue from land sales, along with increased expenditures to support people as the economy struggled, weighed heavily on many local government budgets.

Many localities relied on transfer payments from the central government to make up for last year’s budget gaps — most notably Sichuan, which received about 648 billion yuan (S$126.5 billion) in such payments last year to cover its budget shortfall, the highest in history for any province, the newspaper reported.

The augmented budget deficit for all 31 provinces was a record 14.75 trillion yuan last year, 26 per cent larger than in 2021, according to Bloomberg calculations based on Ministry of Finance data.

Those local governments still face several risks this year as they try to balance their budgets. Henan expects downward economic pressure to weigh on tax revenue growth, the newspaper cited that province as saying. That province doesn’t think the scale of tax and fee reductions is likely to be reduced this year, according to the report.

Most provinces will focus their fiscal expenditure efforts this year on stabilising the economy, the paper said — especially when it comes to any efforts that would bolster domestic demand, which is seen as a major driver of growth this year.

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Jiangsu province said it plans to allocate 800 million yuan in fiscal funding to build a modern commercial and trade circulation system, the Securities Times reported, while Zhejiang said it would spend 190 million yuan on support for international exhibitions, as well as encourage companies to expand their markets and orders. BLOOMBERG