Updated April 22nd, 2024 at 14:50 IST

China's Q1 fiscal revenue declines amid tax cut policies

Despite a faster-than-expected growth rate in the first quarter, recent data suggests that domestic demand remains subdued.

Reported by: Business Desk
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China's fiscal revenue for the first quarter saw 2.3 per cent decline compared to the previous year, as noted by the finance ministry on Monday. The decrease was attributed to various factors, including the lingering impact of past tax cut policies.

Despite a faster-than-expected growth rate in the first quarter, recent data suggests that domestic demand remains subdued, adding pressure to the country's fiscal landscape. Analysts point to the ongoing property market downturn, which continues to strain local government finances and fiscal capabilities.

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Tax revenue notably dropped by 4.9 per cent to 4.9 trillion yuan ($676.48 billion) in the first three months. However, there were pockets of growth in revenue from sectors such as cultural, tourism, and advanced manufacturing industries, according to Wang Dongwei, vice finance minister.

Wang highlighted that excluding special factors like a high base and the impact of tax cut policies from 2023, China's fiscal revenue actually grew by approximately 2.2 per cent in the first quarter.

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Meanwhile, fiscal expenditures saw a 2.9 per cent year-on-year increase to nearly 7 trillion yuan in the first quarter, a notable slowdown from the 6.7 per cent growth observed in the initial two months.

Addressing concerns about the slow issuance of local government special bonds during January-March, Wang Jianfan, an official at the ministry, cited factors such as project funding needs, seasonal influences on construction conditions, and bond market interest rates.

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The finance ministry reiterated its commitment to supporting technology-led industrial innovation through tax and fee cut policies, aiming to bolster technology innovation and manufacturing development.

Amid challenges like tepid domestic demand and the ongoing property crisis, Beijing is prioritizing investment in high-tech manufacturing to stimulate economic growth.

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"We will strengthen macro control, focus on expanding domestic demand, cultivate and develop new growth drivers, and prevent and defuse risks," Wang stated, emphasizing the importance of improving the quality and efficiency of fiscal policies for economic recovery.

Furthermore, funds from sovereign bonds issued last year have been allocated to local governments, with significant spending on disaster prevention and emergency management witnessed in the first quarter, particularly amidst recent floods in southern China's Pearl River Delta.

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(With Reuters inputs)

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Published April 22nd, 2024 at 14:50 IST