Fis­cal rev­enue records faster year-on-year growth in June

‘Sound eco­nomic fun­da­men­tals’ seen be­hind ac­cel­er­ated growth

China Daily (Hong Kong) - - FRONT PAGE - By WANG YANFEI wangyan­fei@ chi­

China’s fis­cal rev­enue recorded faster year-on-year growth in June, adding to signs of struc­tural im­prove­ment of the world’s sec­ond­largest econ­omy.

Fis­cal rev­enue in­creased by 8.9 per­cent year-on-year to 1.7 tril­lion yuan ($251 bil­lion) last month, ac­cel­er­at­ing from the 3.7 per­cent growth in May, ac­cord­ing to the Fi­nance Min­istry.

In the first six months, fis­cal rev­enue in­creased by 9.8 per­cent year-on-year to 9.43 tril­lion yuan.

“Sound eco­nomic fun­da­men­tals sup­ported faster growth of fis­cal rev­enue in the first half,” said Lou Hong, di­rec­tor-gen­eral of the Min­istry of Fi­nance’s Trea­sury Depart­ment.

Some in­di­ca­tors that achieved faster year-on-year growth con­trib­uted to higher growth of tax in­come, ac­cord­ing to Lou, re­fer­ring to year-on-year im­prove­ment of in­dus­trial val­ueadded out­put and to­tal re­tail sales.

Tax col­lected from in­dus­tries that have be­come new growth en­gines wit­nessed sig­nif­i­cant growth, with tax from in­ter­net ser­vices in­creas­ing by 58.9 per­cent year-on-year in the first six months and that from soft­ware and in­for­ma­tion tech­nol­ogy ser­vices by 38.7 per­cent.

The eco­nomic re­cov­ery is ex­pected to con­tinue in the sec­ond half, as fis­cal spend­ing will be al­lo­cated to meet key ex­pen­di­ture needs to sus­tain the good trend, ac­cord­ing to Wu Hai­jun, deputy di­rec­tor of the min­istry’s Bud­get Depart­ment.

Gov­ern­ment spend­ing in the first six months in­creased by 15.8 per­cent from a year ear­lier, the min­istry said.

How­ever, Lou said fis­cal rev­enue faces down­ward pres­sure in com­ing months.

“Value-added tax re­form and a slew of tax cut poli­cies in­tro­duced since last year will lead to a de­cline in this cat­e­gory,” he said.

Tax col­lected from the con­struc­tion in­dus­try and the fi­nan­cial sec­tor, both of which were in­volved in the value-added tax re­form, de­creased by 26.6 per­cent and 4.3 per­cent in the first half, re­spec­tively, data showed.

In the mean­time, ris­ing pro­ducer’s prices that were ex­pected to mod­er­ate in the com­ing quar­ters and cool­ing­down mea­sures in the real es­tate sec­tor since last year will also drag down the growth rate of fis­cal rev­enue, ac­cord­ing to Lou.

Slow­ing growth of fis­cal rev­enue is an ex­pected trend amid the na­tion’s ef­forts to im­prove the tax sys­tem, be­cause tax cut poli­cies ben­e­fit en­ter­prises in the long run, ac­cord­ing to Zhang Bin, head of the global macro-econ­omy division of the Chi­nese Academy of So­cial Sciences.

While slower growth in the fu­ture may put pres­sure on re­pay­ment of lo­cal gov­ern­ment debts, there are tools to cush­ion the pres­sure, in­clud­ing the cen­tral gov­ern­ment pro­vid­ing subsidies to lo­cal gov­ern­ments fac­ing fis­cal pres­sure, ac­cord­ing to Zhang.

Zhang Lianqi, a fi­nan­cial ex­pert whom the min­istry con­sults, said that lo­cal gov­ern­ment debt re­mains at a con­trol­lable level, but the gov­ern­ment needs to en­hance ef­forts to close loop­holes, re­fer­ring to risks hid­den in pub­lic-pri­vate part­ner­ship projects and gov­ern­ment in­vest­ment plat­forms.

The gov­ern­ment has ex­panded fi­nanc­ing chan­nels for lo­cal gov­ern­ments by in­tro­duc­ing land rev­enue bonds.

The in­tro­duc­tion of such bonds will give lo­cal gov­ern­ments greater bor­row­ing ca­pac­ity to fi­nance de­vel­op­ment projects and im­prove trans­parency of debt man­age­ment, ac­cord­ing to Moody’s In­vestors Ser­vice.

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