China's fiscal revenue growth slows, signals broadening economic pressure

China's fiscal revenues grew at a slower annual pace in the first six months, data showed on Wednesday (19 July), signalling broadening economic pressures that have fanned expectations of fresh stimulus steps to shore up growth.

The world's second-biggest economy grew at a frail pace in the second quarter as demand weakened at home and abroad, while policymakers face several other challenges including weak private sector confidence and surging local government debt.

Fiscal revenues grew 13.3% in the first six months of 2023 from a year earlier, slower than a 14.9% rise in the first five months, finance ministry data showed.

In June alone, fiscal revenue rose 5.6% from a year earlier, slowing sharply from a 32.7% jump in May, according to Reuters calculations based on the ministry's data.

Income from land sales, the biggest source of funds that local governments raise directly, shrank 24.26% year-on-year in June, steeper than a 13% drop the previous month, according to Reuters calculations based on the ministry's data.

The weak land sales data suggested that cash-strapped developers remained cautious about buying land, highlighting the strains in the property sector, traditionally a key driver of economic growth. The property industry has struggled in the past two years amid a severe debt crisis.

Official data this week showed gross domestic product expanded 6.3% in the second quarter from a year earlier, below the forecast 7.3% growth, adding to signs of rapidly tapering economic momentum following the initial COVID reopening bounce.

Fiscal spending rose 3.9% in the January-June period, slowing from a rise of 5.8% in the first five months, the ministry's data showed.

Fiscal revenue totalled 11.9 trillion yuan ($1.65 trillion) in the first six months while spending totalled 13.4 trillion yuan, the ministry's data showed.

Policy insiders and economists said authorities are likely to roll out more stimulus steps including fiscal spending to fund big-ticket infrastructure projects, more support for consumers and private firms, and some property policy easing measures.

China will guide local governments to speed up the issuance of special bonds, Li Dawei, an official at the ministry, said at a press conference in Beijing on Wednesday, adding local governments have issued 2.17 trillion yuan of special bonds in the January-June period.

The government plans to increase funding for infrastructure projects with 3.8 trillion yuan in special local government bonds this year, up from last year's 3.65 trillion yuan.

($1 = 7.2021 yuan)