China’s budget deficit records $1.1 trillion on Covid zero fall
New Delhi: China’s broad budget deficit hit a record so far this year, showing how detrimental the now-abandoned Covid Zero strategy and the ongoing housing collapse have been to the economy and the government’s finances.
According to calculations made by Bloomberg based on data from the Ministry of Finance, the augmented fiscal deficit was 7.75 trillion yuan ($1.1 trillion) from January to November. That was more than double the same period last year and larger than in 2020, when the economy was battered by the initial Covid outbreak and growth was the slowest in decades.
The Covid Zero policy’s essential lockdown, testing, and quarantine guidelines put a strain on consumer and business expenditure, bringing the economy close to contraction in the second quarter. Retail sales fell in October and November as a result of an increase in illnesses this quarter.
Huge costs were invested by local governments to test and quarantine residents, while their income from land sales and taxes fell due to a downturn in the housing market, a report by Bloomberg further added.
Local governments are unlikely to experience a rapid increase in tax revenue and finances given the current nationwide spread of Covid infections. Even if spending on testing and quarantines decreases, healthcare cost is likely to increase as more people fall sick. Additionally, there is little chance that the real estate market will revive very soon, which will probably keep land sales revenue low.
In November, Car sales, a rare bright spot for consumption this year, declined for the first time in six months, while the fall in home purchases deepened despite local authorities further eased curbs on buying.
Total income from the general public and government fund budgets was 18.6 trillion yuan in the first 11 months of this year. This was 3% lower than a year ago, which was a reduction from the 4.5% decline seen in the first 10 months. According to the finance ministry, it would have increased 6.1% if it weren’t for tax refunds that the government primarily distributed earlier in the year.
n November, governments across the country made 715 billion yuan from selling land, compared with the 552 billion yuan earned in the previous month but down about 13% from a year earlier. Revenue from land sales has decreased almost every month this year by double digits.
Revenue from deed taxes slid 23.8% in the first 11 months of the year from the same period in 2021.
Total government spending in the first 11 months was 22.7 trillion yuan, which was up 6.2% from a year earlier and compares with a 6.4% rise in the January-October period. Expenditure under the government fund budget rose 5.5%, decelerating from a 9.8% increase in the first 10 months, the report further added.
Finance Minister Liu Kun predicted that this year’s overall fiscal spending will amount to 26.3 trillion yuan in an article that was released by the official publication Study Times Monday.
With inputs from agency