MNI POLICY: China Fiscal Revenue To Increase As Econ Recovers

China's fiscal revenue will continue to grow as tax income increases with the economic recovery, but the authorities will prioritize the fiscal sustainability of local governments by transferring central government funds, officials at the Ministry of Finance said Wednesday in a briefing.

The government's total revenue contracted 6.4% y/y in the first three quarters of this year, compared with a 3.3% increase in the same period of 2019, said Liu Jinyun, a senior ministry official.

Tax revenues fell 6.4% following a 0.4% drop in the same period last year but they have increased as corporate profits grow, beating expectation, and grew 8.2% y/y in September, Liu said.

TAXES, FEES

Fiscal spending contracted 1.9% y/y from January to September as against the 9.4% growth last year as the Covid-19 outbreak held up projects and local governments cut general spending.

However, some CNY2.8 trillion of the funds raised through local government special-purpose bonds was spent in the first nine months, effectively supporting investment, Liu said.

China issued local government special-purpose bonds worth CNY3.7 trillion in the first three quarters, compared with CNY3.75 trillion in the whole of the total quota for the year, said Wang Kebing, an official at the budget department.

The funds were mostly for large infrastructure and public projects, he said, noting that about CNY300 billion has been used as capital for big projects.

The ministry will continue with measures to cut and defer tax and fees, which will reduce the burden of companies by over CNY2.5 trillion for the year, said Chen Donghao, an official at the tax policy department.