China’s fiscal revenue, expenditure pick up growth in October

CHINA’S fiscal revenue and expenditure growth both accelerated in October from September, according to Reuters calculations based on official data on Wednesday (Nov 16), as the impact from massive tax credit rebates eased and an infrastructure push continued.

For October alone, fiscal revenue grew at a double-digit pace of 15.7 per cent from a year earlier, faster than a 8.4 per cent gain in the month prior, according to Reuters calculations based on the finance ministry data.

Against the broad slowdown in the economy in October, China’s fiscal revenue growth has picked up pace as the impact of value-added tax (VAT) credit rebates soothed at the end of the year.

“Once the tax credit rebates are completed, it is normal to see higher fiscal revenue in the second half of this year than that in the first half. The impact of tax credit rebates are gone,” said Luo Zhiheng, chief macroeconomic analyst at Yuekai Securities.

Fiscal revenue grew 5.1 per cent in the first 10 months, after adjusting for the impact of VAT credit rebates, exceeding a 4.1 per cent gain in the first nine months.

Meanwhile, government revenue from land sales in October fell 3.8 per cent year-on-year, narrowing from a 26.4 per cent slump in September, as local governments have relaxed land purchase rules by developers and sold lands more times than last year.

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October is a peak month for land sales revenue traditionally with a new round of land auction in many cities, said Lu Wenxi, chief analyst of property agency Centaline.

But falling home prices suggested a deepening contraction in the housing sector that prompted authorities to ramp up support for it in recent days.

As China doubled down on an infrastructure push, dusting off an old playbook by issuing debt to fund big public works projects to revive the economy, fiscal expenditure growth rose to 8.7 per cent in October from 5.4 per cent in September, according to Reuters calculations based on official data.

“The faster fiscal spending growth drove up infrastructure projects directly, reflecting policies have taken effect,” Luo said, adding infrastructure is currently offsetting the downturn in domestic demand.

Fiscal expenditure rose 6.4 per cent to 20.6 trillion yuan in the first 10 months, according to the finance ministry.

For the January to October period, 97 fixed-asset investment projects worth 1.4 trillion yuan were approved, according to the state planner on Wednesday.

October data and rising number of Covid cases since November suggest the world’s second-largest economy is still facing a series of headwinds including protracted Covid-19 curbs, global recession risks and a property downturn. REUTERS