China's Fiscal Deficit Nears $1 Trillion by September... Triple Compared to Previous Year

Aftermath of Continued Zero-COVID Policy and Real Estate Slump

[Image source=AP Yonhap News]

[Asia Economy Beijing=Special Correspondent Kim Hyunjung] China’s fiscal deficit soared to an all-time high as of the end of September this year, due to the impact of zero-COVID prevention measures and the real estate market slump.

According to data analyzed by Bloomberg News on the 25th (local time) from the Chinese Ministry of Finance’s announcement the previous day, the combined cumulative deficit of China’s central and local governments reached 7.16 trillion yuan (approximately 1,403 trillion won) as of the end of September. This is three times the deficit size of 2.6 trillion yuan recorded during the same period last year.

The sharp decline in revenue for both central and local governments was largely due to increased expenditures such as large-scale tax refunds this year and the ongoing real estate market crisis. Nevertheless, the authorities continued high-intensity prevention measures including lockdowns to curb the spread of COVID-19, pouring fiscal resources into control and nucleic acid testing. Additionally, efforts were made to increase spending on infrastructure to stimulate the sluggish economic growth. Thanks to this ‘money injection,’ despite worsening retail sales and rising unemployment, the GDP growth rate, which had plummeted to 0.4% in the second quarter, rebounded to 3.9% in the third quarter.

Government revenue from the beginning of this year through September totaled 19.9 trillion yuan. General public revenue decreased by 6.6% compared to a year earlier, but the Ministry of Finance explained that excluding the impact of tax refunds, it actually increased by 4.1%. After the concentrated tax reductions from April to June, revenue somewhat increased, recording 1.5 trillion yuan in September alone, an 8.4% increase year-on-year. During the same period, total government expenditure, including general public spending (19 trillion yuan) on education, healthcare, defense, and scientific research, reached 27.1 trillion yuan, a 6.2% increase compared to the same period last year.

Revenue from land sales, considered a cash source for local governments, sharply declined by 28.3% year-on-year to 3.85 trillion yuan through September this year. This was due to real estate developers, suffering from liquidity shortages, hesitating to purchase land.

Analyst Luo Zhiheng from Yuekai Securities stated, “China set this year’s deficit target at about 2.8% of GDP, but to cope with fiscal pressures expected to partially deepen due to real estate issues and others, the deficit will inevitably increase.”

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