BEIJING, March 7 (TMTPOST) — China has budgeted a year-on-year increase of 6.7% in fiscal revenues in 2023, up from 0.6% in 2022.
Revenues from land sales, which are a major source of revenues for local governments, are expected to remain sluggish in 2023, with slight year-on-year growth of about 0.4%. Revenue from government funds based on land sales contracted sharply by more than 20% to 7.8 trillion yuan in 2022.
The increase in fiscal deficit in 2023 is mainly attributed to the central government’s leveraging, while the size of the local deficit will remain the same as in the previous year. The report also predicts that government fund budget revenue will only increase slightly by 0.4% compared to 2022. In the social security fund budget, the scale of financial subsidies will continue to expand.
Deficit Increase Mainly Stems From the Central Government’s Leveraging
According to the Report on the Implementation of the 2022 Central and Local Budgets and the 2023 Draft Central and Local Budgets submitted for consideration on March 5, China’s general public budget revenue in 2023 is expected to reach 21.73 trillion yuan, up 6.7 percent year on year.
The fiscal deficit in 2023 was set at 3% of gross domestic product (GDP) or 3.88 trillion yuan, a small uptick from the deficit-to-GDP ratio of 2.8% in 2022. The increase mainly comes from the central government’s increased leverage, with the central fiscal deficit expanding by 510 billion yuan from 2022 to 3.16 trillion yuan. The local fiscal deficit of 720 billion yuan, unchanged from 2022, will be compensated by issuing local government general bonds.
The total revenue of the general public budget in 2023 will not only include the annual revenue of 21.73 trillion yuan, but also include the transfer of funds and the use of the carryover balance of 1.9 trillion yuan. That is, the 2022 surplus carryover funds will supplement the 2023 financial resources to some extent.
Land Sale Revenue Expected to Remain Low
Land sales have been an essential source of local financial resources, but revenue from this sector is expected to remain sluggish. According to the Report, national governmental fund budget revenue is projected at 7.81 trillion yuan in 2023, a slight increase of 0.4% from 2022.
The government fund revenue in 2022 was only 79% of what was budgeted at the start of the year, down 20.6% year-on-year. The shrinking revenue from land sales dragged down local government fund revenue, resulting in reduced expenditures such as compensation for demolition and relocation. The central government fund revenue was less impacted, with all the budgets set at the beginning of the year completed. As a result of lower-than-expected spending on additional revenue from electricity prices for renewable energy, the central government fund expenditure had a carryover of 739.309 billion yuan in 2022, which will be carried forward to 2023.
Overall, the fiscal balance situation in 2023 is still severe. While the growth in fiscal revenue is expected to be higher than the previous year, uncertainties in economic growth and the impact of tax policies on fiscal revenue will continue to be monitored.
