"Lowered Growth Rate of China's Fiscal Revenue Limits Response Capability to Novel Coronavirus"

[Asia Economy Beijing=Special Correspondent Park Sun-mi] Concerns are emerging that China's lowered fiscal revenue growth rate could narrow the government's room for maneuver in minimizing the economic impact of the novel coronavirus infection.

According to the announcement by China's Ministry of Finance on the 10th (local time), China's fiscal revenue last year increased by only 3.8%, showing a significant difference from the 6.2% growth rate in 2018. This is the lowest fiscal revenue growth rate since 1987. The impact was largely due to fiscal expenditure increasing by 8.1% to minimize the economic shock from the trade war, despite bold tax cuts resulting in tax revenue increasing by only 1%.

The Ministry of Finance says an increase in fiscal expenditure is inevitable this year as well. With the economic growth rate already declining, the spread of the novel coronavirus means there are many areas requiring funding. On the 9th, the Ministry of Finance announced that it had allocated a budget of 71.85 billion yuan at the ministry level to minimize the impact of the novel coronavirus.

However, some worry that the government's lowered fiscal revenue growth rate could make responding to the novel coronavirus more difficult in the future. On the same day, Hong Kong's South China Morning Post (SCMP) explained that "the decline in fiscal revenue will limit the government's ability to increase spending necessary to maintain China's economic growth rate in 2020," emphasizing that although the government needs to increase spending to stimulate the economy due to the novel coronavirus outbreak, it is not an easy situation. Moreover, the Chinese government has declared that it will continue to reduce the tax burden on individuals and enterprises this year, following last year.

Hong Hao, a researcher at China Communications Bank International, believes that the possibility of the Chinese government launching large-scale monetary stimulus for comprehensive economic recovery, as it did during the global financial crisis in 2008-2009 when the economy was struggling, is limited this year. He pointed out, "Some economists argue that large-scale economic stimulus is necessary for the Chinese economy, but these voices overlook limited additional infrastructure investment capacity, high local government debt, and the potential consumption contraction due to household debt."

This content was produced with the assistance of AI translation services.