Key Takeaways:
- China's economy is facing a fiscal deficit of nearly $1 trillion.
- Meanwhile, the government delayed the release of key economic data.
PATNA (CoinChapter.com) — China’s economy, currently hobbling under the weight of global recession risks, is facing another threat- a fiscal shortfall of $1 trillion.
The shortage has made it difficult for Chinese provinces to fund infrastructure expenses and tax cuts. Besides recession risks, China’s economy is also battling rising commodity costs, geopolitical tensions, and COVID-19 lockdowns at home.
Local governments have been the backbone of China’s growth, but a fall in state land tax revenue has damaged the Chinese government’s financial power.
Furthermore, a crackdown on debt in the land sale sector, weak economic growth, lesser tax income, and COVID restrictions have further hurt the country’s economy. Local governments even resorted to hefty fines, lower subsidies, and salary cuts to meet Beijing’s increasing expenses.
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In the current year, China’s 31 provinces reported a fiscal deficit of 6.74 trillion yuan ($948 billion), the largest since 2012. The Sichuan, Henan, Hunan, and Guangdong provinces recorded the largest shortfalls.
Meanwhile, govt land sales fell 28.5% year-on-year in the same timeframe. Additionally, the Xi Jinping( 习近平 )-led government would be wary of tackling the deficit with a large stimulus package. Globally, economies are busy raising interest rates to combat inflation, which came after similar stimulus packages.
China Government Delays Release Of Fiscal Policy and GDP Data
China announced that it was indefinitely delaying the release of economic data. The data includes some closely watched indicators of economic growth. Hence, the sudden decision, without any explanation, raised quite a few eyebrows.
In addition, the delay comes against the backdrop of a twice-a-decade congress of the Communist Party. Authorities have gone to great lengths to ensure a smooth gathering, such as halting nearly all travel into Beijing and frequent COVID tests of the populace.
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As a result, the postponement of the economic data left people wondering if the data was worse than what the authorities expected. Analysts had speculated a 3% YOY growth of China economy in the third quarter.
Although better than Q2 2022’s 0.4% growth, the forecast was still less than Beijing’s expectation of nearly 5.5%. Meanwhile, Chinese officials have received some flak on how the government has put ideology ahead of economic performance.
Economies like China seldom hide key figures and data for fear of losing investor confidence. As such, hiding key data during the meeting of the upper echelons of the ruling party shows the government’s priorities.
