Radio Free Asia (RFA) Chinese Edition recently reported that, according to official government numbers, China’s fiscal situation has worsened significantly. In the first half of this year, the fiscal deficit reached a record RMB 3.4 trillion (around US$485 billion). Expenditures exceeded income by 26.6 percent. Experts expect this gap to expand to 30 to 40 percent in the second half of the year. Government income saw an 8.6 percent decline, year-over-year, while government investments increased by 0.6 percent, which is the only hope to sustain the economy. At the same time, national and local government bond issuance reached record highs of 46.2 percent and 22.9 percent, respectively. Four years ago, most economists expressed the concern that, if the local bonds reached RMB 24 trillion, it would become a “nuclear bomb” for the Chinese economy. Now the number has reached RMB 24 trillion and is still growing. In the meantime, personal income tax revenue increased by 2.5 percent, while the largest tax revenue, the Value-Added Tax (VAT), declined by 19.1 percent, and the second largest tax revenue, the Corporate Income Tax, declined by 7.2 percent, year-over-year.
Source: RFA Chinese, July 22, 2020