What’s new: Most Chinese provincial-level regions are growing pessimistic about their fiscal revenue outlook for 2022 and are slashing budget revenue targets.
Among the 25 provinces that have released fiscal budget plans for 2022, only Henan and Tibet set a goal for 2022 budget revenue to grow faster than last year.
Henan didn’t meet its fiscal revenue goal last year due to the impact of floods and the pandemic. The faster growth target for 2022 reflects a lower base last year. Tibet’s 2021 revenue declined 3.6% in 2021, the only province with a contraction.
Most provinces set growth goals of 2% to 10%. Hainan was the highest at 10%, boosted by the country’s free trade port policy. Inner Mongolia was the lowest at 2%.
Many provinces cited uncertainties for fiscal revenue and a tight balance between fiscal revenue and expenditures. Guangdong province, which set a growth goal at 5%, said the tight balance will be further highlighted in 2022. Guizhou, also aiming for 5% growth, said the tight balance is unlikely to improve in the short term.
Provincial-level regions including Qinghai and Gansu with relatively high debt said they face limited room to borrow more in 2022 as there are fewer projects that meet the requirements for special bond financing.
The background: China’s fiscal revenues rose 10.7% to 20.25 trillion yuan ($3.2 trillion) in 2021 from a year earlier, exceeding the government’s goal of an 8.1% increase, boosted by economic recovery and increases in producer prices, the Finance Ministry said last month.
China’s GDP grew 8.1% in 2021. However, that was partly due to a low comparison base in 2020, when the economy was disrupted by Covid-19 and expanded by just 2.2%.
Compared with robust growth of fiscal revenue, expenditures rose at a slower rate. That reflected the central government's requirement to cut expenditures to free up more funds to support local governments and communities, Vice Finance Minister Xu Hongcai said at a news conference.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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